Looking for a reversal in EBS
Lets take a look at the weekly chart of EBS, Emergent BioSolutions.
I spotted this chart a while ago because its beautiful and predictable uptrend but now I am starting to think that this might be a good short trade.
Take a look at the chart here: http://stockcharts.com/h-sc/ui?s=EBS&p=W&b=5&g=0&id=p88491272954
This is a weekly chart of EBS with Bollinger Bands, 50/200 day moving averages, RSI on top and MACD on the bottom.
If you look at the recent trend in the stock it has been mostly up, staying above the middle line of the Bollinger bands and continuously pushing the upper limit of the Bollinger Bands higher. This is a very bullish trend in the stock and can usually be traded by buying at a reasonable projection of the middle of the Bollinger bands and selling at the top, but has the stock run up too much?
The recent volume in the stock is up drastically and the price seems to be waning, perhaps indicating some profit taking. The RSI is above 70 and has hit its own resistance level signaling an overbought situation.
The stock has been also been hitting a price resistance at the $26 level and I think that it will be a level that is not going to break.
The trade here is to short at the $26 level with a tight protective stop at $27 which is a 3.8% loss and a potential for the stock to go down to around $15 if the trend turns.
