The cloud-based professional employer organization for small and medium-sized businesses, TriNet Group Inc. (NYSE: TNET) seems to be poised for a decline in its price in the near term as per its latest charts.
#1 Rising Wedge Breakdown: The daily chart shows that TNET has recently broken down from a rising wedge pattern that was formed during the past few months. This is a bearish pattern and is marked in blue color in the daily chart. If a stock breaks down from the bottom of the rising wedge pattern, it typically moves lower in the near-term. After breaking down from the rising wedge pattern, the stock has been moving up on low volumes.
#2 Bearish Candle: The latest candle is a hanging man which is a bearish candle. This candlestick pattern indicates that there is a selling pressure at higher prices. The stock had also closed down from the day’s high. This is another bearish sign.
#4 Bearish Candle on the Weekly Chart: The weekly chart shows that there was a long-tailed bearish candle formed recently.
After weeks of consolidation, the stock broke out of the range last week.
However, it turned out to be a false breakout as it closed back into the range again, forming a long-tailed bearish candle.
This indicates a possible selling climax. This is a bearish sign.
#5 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color) in the weekly chart, indicating bearishness.
#6 Overbought Stochastic: The stochastic in the weekly chart is also near overbought levels and moving down. The %K line has also crossed below the %D line. All these indicate possible bearishness.
#7 RSI overbought: The RSI in the weekly chart is near overbought levels. This indicates that the stock may move lower. It is a possible bearish sign.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on TNET at the current price of $55.58.
TP: Our target prices are $50 and $47 in the next 3-6 months.
SL: To limit risk, place a stop loss at $57.20. Note that this stop loss is on a closing basis.
Our target potential downside is 10% to 15% in the next 3-6 months. For a risk of $1.62, our target rewards are $5.58 and $8.58. This is a nearly 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 5x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.