SAGE Therapeutics Inc (NASDAQ: SAGE)

Sage Therapeutics, Inc., a clinical-stage biopharmaceutical company, develops and commercializes novel medicines to treat central nervous system disorders. The company’s lead product candidate includes SAGE-547, a proprietary intravenous formulation of allopregnanolone that is in Phase III clinical development as an adjunctive therapy for the treatment of super-refractory status epilepticus (SRSE). It is also conducting an additional Phase II exploratory trial of SAGE-547 in the treatment of severe post-partum depression (PPD).

Take a look at the 1-year chart of Sage (NASDAQ: SAGE) below with added notations:

1-year chart of Sage (NASDAQ: SAGE)

Over the past several weeks, SAGE has moved into a sideways trading range. While in the range, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.

The SAGE rectangle pattern has formed a resistance at $56 (red), and a $47.50 support (green). At some point the stock will have to break one of the two levels.

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The Tale of the Tape: SAGE is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $47.50 or on a breakout above $56. The ideal short opportunity would be on a break below $47.50.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach