Riding the Wave: The Bullish Case for MRNA’s Inverted Scallop
Updated
In the dynamic world of stock trading, there are some patterns which emerge that tell a story of market sentiment, investor behavior, and potential future movements. One such narrative is unfolding with Moderna Inc. (MRNA), where an intriguing pattern has caught my eye as we've seen a price rebound since November 2nd, 2023, the inverted scallop. The inverted scallop is not a well known pattern, but renowned candle expert Thomas Bulkowski identifies it as an important one. You can see what Bulkowski says about this pattern here: thepatternsite.com/aiscallop.html
The Inverted Scallop: A Sign of Reversal
The inverted scallop pattern, resembling a reverse ‘J’, is a bullish reversal pattern that signals a potential shift in momentum. For MRNA, this pattern began to form after a long-term downtrend, with the stock plummeting from a high of $456.76 to a low of $71.23. However, the tide seems to be turning, with the price curving upwards in a recovery that mirrors the shape of an inverted scallop shell. Bulkowski shows an example of this pattern with the price action of Boeing in 2005. It bares a striking resemblance to what we are seeing with MRNA today.
Confirming the Pattern with Technical Indicators
While the scallop pattern itself is compelling, confirmation from other technical indicators is crucial for a robust bullish thesis:
- Divergence: The presence of bullish divergence, where the price hits a lower low while an oscillator forms a higher low, suggests that the downtrend is losing steam.
- Chaikin Money Flow (CMF): A positive CMF value during the formation of the scallop pattern indicates buying pressure and accumulation, reinforcing the bullish outlook.
- Resistance Breakout: A key factor for the pattern’s confirmation is the breakout above significant resistance levels. For MRNA, breaking past the resistance zone between $86.02 and $87.11, as well as subsequent levels at $89.90 and $97.28, would validate the reversal.
Market Psychology: Reading Between the Lines
The long-term downtrend followed by the inverted scallop pattern reflects a shift in market psychology. Initially driven by fear, the potential reversal indicates a change towards optimism, as investors begin to recognize value and anticipate a positive future for MRNA. We see this in the fundamental analysis of MRNA with the news of their recent success in phase 2 studies on cancer vaccines.
Conclusion: A New Chapter for MRNA?
As MRNA’s price action paints a picture of recovery, the inverted scallop pattern offers hope for the continuation of a bullish reversal. Supported by technical indicators and a change in market sentiment, the narrative suggests that MRNA could be on the cusp of a new chapter.
The Inverted Scallop: A Sign of Reversal
The inverted scallop pattern, resembling a reverse ‘J’, is a bullish reversal pattern that signals a potential shift in momentum. For MRNA, this pattern began to form after a long-term downtrend, with the stock plummeting from a high of $456.76 to a low of $71.23. However, the tide seems to be turning, with the price curving upwards in a recovery that mirrors the shape of an inverted scallop shell. Bulkowski shows an example of this pattern with the price action of Boeing in 2005. It bares a striking resemblance to what we are seeing with MRNA today.
Confirming the Pattern with Technical Indicators
While the scallop pattern itself is compelling, confirmation from other technical indicators is crucial for a robust bullish thesis:
- Divergence: The presence of bullish divergence, where the price hits a lower low while an oscillator forms a higher low, suggests that the downtrend is losing steam.
- Chaikin Money Flow (CMF): A positive CMF value during the formation of the scallop pattern indicates buying pressure and accumulation, reinforcing the bullish outlook.
- Resistance Breakout: A key factor for the pattern’s confirmation is the breakout above significant resistance levels. For MRNA, breaking past the resistance zone between $86.02 and $87.11, as well as subsequent levels at $89.90 and $97.28, would validate the reversal.
Market Psychology: Reading Between the Lines
The long-term downtrend followed by the inverted scallop pattern reflects a shift in market psychology. Initially driven by fear, the potential reversal indicates a change towards optimism, as investors begin to recognize value and anticipate a positive future for MRNA. We see this in the fundamental analysis of MRNA with the news of their recent success in phase 2 studies on cancer vaccines.
Conclusion: A New Chapter for MRNA?
As MRNA’s price action paints a picture of recovery, the inverted scallop pattern offers hope for the continuation of a bullish reversal. Supported by technical indicators and a change in market sentiment, the narrative suggests that MRNA could be on the cusp of a new chapter.
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