The American restaurant and entertainment business company headquartered in Dallas, Dave & Buster’s Entertainment Inc. (NASDAQ: PLAY) seems to be ready for a price surge in the near-term.
Bullish Indications
#1 Channel Breakout: PLAY’s daily chart shows that the stock has currently broken out of a channel. This channel is marked on the daily chart in purple color. This seems like a bullish indication.
Daily Chart – PLAY
#2 Cup and Handle pattern breakout: The stock has also broken out of a cup and handle pattern. This pattern is marked in the daily chart in orange color. A cup and handle pattern is a consolidation and breakout pattern and a breakout from it indicates that the stock may move higher in the short term.
[hana-code-insert name=’adsense-article’ /] #3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI).
#5 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
#6 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#7 Downtrend Broken: The weekly chart shows that the stock’s downtrend has been broken. The downtrend line is shown in purple color in the weekly chart below. The stock had broken out and then retested the downtrend line again before resuming its upmove. This is a bullish sign.
Weekly Chart – PLAY
#8 IH&S breakout: In the weekly chart, the stock has currently broken out of an IH&S pattern. This is marked in orange color in the chart. A breakout from a bullish pattern like IH&S pattern indicates that the stock could move higher in the short term.
#9 Other Bullish Indications: The MACD line (blue color) is above the signal line (orange color) in the weekly chart.
The stochastic shows that %K is above the %D line. Aroon indicator is also having a bullish bias. All these indicate a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can the shares of PLAY at the current price of $57.45.
TP: Our target prices are $70 and $80 in the next 3-6 months.
SL: To limit risk, place a stop loss at $52.80. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 22% to 39% in the next 3-6 months. For a risk of $4.65, our first target reward is $12.55 and the second target reward is $22.55. This is a 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the IH&S and cup and handle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any new government rules or regulatory changes in its sector.
Happy Trading!
Tara
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