Cara Therapeutics Stock Is Set Up for Further Gains

CARA StockCARA Stock: New All-Time High

Biotechnology stocks have woken up from a slumber and they are acting up, which is a nice change because this sector was lagging behind the major market indices for a number of years now. This is especially good news for companies like Cara Therapeutics Inc (NASDAQ:CARA) and Cara Therapeutics stock, which has already been staging a stellar advance this year.

The stellar performance has come as no surprise because I first expressed my bullish view on this company on December 12, 2016, in a publication titled “Cara Therapeutics Inc: The CARA Stock Chart Says It All.” In that publication, I outlined a number of bullish developments that had been occurring on the Cara Therapeutics stock chart that justified holding a bullish view on this investment.

This bullish view was of course well warranted because at the time that publication was written, CARA stock was trading at $10.24. It is currently trading at $28.26, representing an impressive 175.98% return over six months. The reason I am focusing on this investment once again is because new indications have been generated on the price chart, implying that further bullish developments are likely to follow. This means the current performance number is only a precursor of what is to come.

Before I move forward with the recent developments, I would like to highlight the indications that were generated on the following Cara Therapeutics stock chart late last year that supported holding a bullish view on this investment.

Cara Therapeutics stock chart

Chart courtesy of StockCharts.com

This Cara Therapeutics stock chart illustrates that two levels of price resistance were broken simultaneous in early November. This action is what warranted holding a bullish view on this investment.

The first level of price resistance was defined using a downtrend line, which was created by connecting the peaks that followed after CARA shares peaked in August 2015 at $23.61. This downtrend line defined a series of lower highs and lower lows, which ultimately led to a bottom in CARA stock after it hit a low of $4.26 in February 2016.

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The second level of price resistance was defined using a horizontal level of resistance that was created using the peak at $9.00 that occurred in April 2016, created shortly after the share price found its footing. CARA stock returned to test $4.26, putting in a potential double bottom reversal pattern that needed to be confirmed by breaking above the horizontal level of price resistance at $9.00.

In the first week of November 2016, following the presidential election, CARA stock broke above both the downtrend line and the horizontal level of resistance, suggesting that both a bottom and a trend reversal were in play. These were bullish indications suggesting that the path of least resistance was geared towards a higher stock price.

After breaking out, the stock price returned to backtest both of these previous levels of price resistance from above. This price action reinforces that the break above these levels was legitimate and it also establishes these levels as new significant levels of price support.

Following these bullish developments, a significant rally ensued. This rally has just generated a new indication implying that much higher stock prices are on the horizon.

The following Cara Therapeutics stock chart illustrates the bullish development that has just taken place.

CARA price chart

Chart courtesy of StockCharts.com

CARA shares have just forged a new all-time high and this feat is suggesting that much higher CARA stock prices are now on the horizon.

Forging this new all-time high was not an easy task because this level of resistance at $23.80 thwarted two previous attempts at moving beyond it. The third time was a charm and progress has finally been made.

Forging a new all-time high carries a number of bullish implications because in its current state, all bullish investors are carrying profitable positions, while all bearish investors are underwater, carrying a loss on their position. This is the reason why I am so enamored with new all-time highs; momentum investors like to chase new highs and this will only act to increase the pressure on the bearish investors as their losses begin to mount. The bearish camps needing to cover, along with new money flowing into this investment, creates the perfect environment for an accelerated run to the upside to occur.

This accelerated run can potentially run as high as $43.00 from current levels. This potential price objective was generated by taking the depth of the price action below the previous all-time high and extrapolating that value above it.

Bottom Line on Cara Therapeutics Stock

My bullish inclination towards Cara Therapeutics stock has just multiplied, because the stock price is forging a new all-time high. This feat carries a number of bullish indications that all point to a higher CARA stock price.