The psychedelics sector is about to take off if the Compass Pathway chart breaks this pattern

Compass Pathways CMPS has been trading relatively stronger than the S&P 500 recently, in a mostly sideways consolidation pattern against the market ETF, which entered a strong downtrend. the drop on August 16.

The life sciences company focused on psilocybin therapy jumped 181% between the weeks of May 16 and August 8 and has spent the period since consolidation decreasing the volume on the weekly chart.

The gradual upward movement associated with horizontal consolidation may indicate that the stock is settling into a long-term bull flag pattern. If the UK firm breaks the pattern, it could mean another long-term bull run is in the cards not just for the psychedelic leader, but for the industry as a whole.

The bullish flag pattern is created with a sharp rise forming the pole, which is then followed by a consolidation pattern that takes the stock lower between a channel with parallel lines or within a constriction triangle pattern.

For bearish traders, the "trend is your friend" (until it isn't) and the stock may continue to fall into the next channel for a short time. Aggressive traders may decide to short the security at the upper trendline and exit the trade at the lower trendline. Bullish traders will want to watch a break of the upper falling trendline of the flag formation, on high volume, for entry. When a security breaks out of a bull flag pattern, the measured upward movement is equal to the length of the pole and should be added to the lowest price in the flag.

A bullish flag is canceled when a stock closes on a trading day below the lower trendline of the flag pattern or if the flag falls more than 50% along the length of the bullish flag. pole.

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The Compass Pathways Chart: To indicate that the bullish flag pattern on the weekly chart is recognised, traders will want to watch the stock breakout from the upper falling trendline of the rising flag. volume above average. If that happens, the measured movement indicates that Compass Pathways could eventually climb towards the $42 mark.

When this week's and last week's price history are combined, Compass Pathways may also have printed a double bottom pattern at the $15.08 level. The double bottom pattern combined with the bull flag formation can help the stock gain momentum if the stock breaks higher. The Altrincham, Cheshire-based company is trading in an inside bar pattern on the weekly chart, which is tilting slightly bullish although the stock was trading lower before forming the pattern. The trend is bullish as the stock looks set to end this week near the upper range of last week's parent bar. From a bearish perspective, Compass Pathways is trading in a fairly consistent downtrend on the daily chart, with the latest lower high formed on August 25th at $18.74. However, the stock did not print a bottom below the August 22 low of $15.08, which may indicate that a symmetric triangle pattern will develop over the period. Compass Pathways has resistance above $18.03 and $21.26 and support below at $15.59 and $13.22. See also: COMP SERVICES (CMPS) - COMPASS Pathways sued for alleged theft of psilocybin trade secrets

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