The 120-minute chart shows that mid-term, NEO is moving inside an ascending channel. On the chart, it is represented by a linear regression channel showing the ±2 and ±5 standard deviation edges (sigmas). Since its significant drop happening on May 10, NEO's price development is mostly sideways. The latest leg is driving the prices down, after the rejection from $10.55. The prices moved to touch the -2 sigma edge of the channel and bounced off of it. although the bullish momentum is still absent, the current price situation can be considered as oversold, or cheap, compared to the fair price represented by the dotted linear regression line ($10.55).
A bullish setup is considered because:
1.- the primary trend is bullish,
2.- the corrective leg after the large drop has been sideways.
3.- $9.57 seems to be a strong support level.
The confirmation of the setup should come from a break of the $10 level, on increasing volume. We could create a first profit target precisely at the current fair price of 10.55, letting 50% of the position evolve in search of the second target, which can be set at the current +2 sigma level of 11.46. An alternative strategy might be applied to the second half of the position. Instead of having a target level at $11.46 the position is tracked using a trail stop the side of the initial risk ($0.66), and let it evolve: that way it might be possible to catch a large impulsive movement such as the one that was experienced on the 8th and 9th of May.
Main levels:
- Long Stop entry: 10.11
- Invalidation level: 9.57
- 1st profit target: 10.55
- 2nd profit target: 11.46
Combined reward/risk factor: 1.66