A descending triangle pattern has emerged in the chart of Veracyte Inc. (VCYT). If the support level is broken, a breakdown could occur.
VCYT is a genomic diagnostics company. It provides genomic diagnostic products and services to improve patient care against diseases such as thyroid cancer, lung cancer, and idiopathic pulmonary fibrosis.
The company initially struggled during the pandemic, but came back strong in the third quarter as its revenue and test volumes improved markedly, driven by a recovery in genomic testing. VCYT’s revenue for the third-quarter was $31.1 million, a 50% increase over the preceding quarter, and above its third-quarter 2019 numbers.
As of the end of the quarter, the company had $345 million in cash, compared to only $11 million in long-term debt. VCYT is also plenty of cash to handle short-term obligations with a sky-high current ratio of 26.6.
The company has a history of strong revenue growth, up an average of 17.9% over the past five years. Sales are expected to rise 32.6% this year. Its stock price is trading at a reasonable valuation with a P/E of 22.6.
While VCYT stock is down for the month, it has shown both near and long-term momentum. This mixed performance has led to a “Neutral” rating in our POWR Ratings system.
Take a look at the 1-year chart of VCYT below with my added notations:
Chart of VCYT provided by TradingView
VCYT has formed key support in the $47 (green) area over the past couple of months. The stock is also declining against a down trending resistance line (red). These two levels combined have VCYT stuck within a common chart pattern known as a descending triangle. Eventually, the stock will break out of it.
A short trade could be made on a break of the $47 support level.
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Christian Tharp, CMT
VCYT shares rose $0.14 (+0.28%) in premarket trading Tuesday. Year-to-date, VCYT has gained 2.17%, versus a 1.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock. More...
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