The American laser company founded by Scott Keeney, Nlight Inc. (NASDAQ: LASR) seems to be ready for an upmove in the near term as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern: The daily chart shows that the stock has been forming a falling wedge pattern during the past few weeks. This is marked in purple color in the daily chart. If the stock breaks out of the top of the falling wedge pattern, it can move higher in the near-term.#2 Oversold RSI: The daily chart shows that the RSI is currently moving upwards from oversold levels. This is a bullish sign.
Daily Chart – LASR
#3 Double Bottom: A double bottom is currently being formed in the daily chart. This is marked in orange color on the chart. Once the stock breaks out of this bullish pattern, it may move higher.
[hana-code-insert name=’adsense-article’ /] #4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.#5 Bullish Cross in Chaikin Osc: Whenever there is a crossover on the Chaikin Oscillator from below the zero line to above the zero line, it is termed as a bullish cross.
Typically, prices start to increase whenever this crossover happens.
Currently, the Chaikin Oscillator has had a bullish cross which is a possible bullish sign.
#6 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. LASR seems to have currently taken support at the 38.2% Fibonacci support level of the upmove, as seen in the weekly chart.
Weekly Chart – LASR
This is also near a good demand area, which is marked as a pink rectangle. The stock had consolidated near the demand area before moving up from the week ending May 14, 2018. So, this seems like a good point to bounce back from.
#7 Strong RSI: The RSI in the weekly chart is currently above 50 and moving up, indicating possible bullishness in the near-term.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of LASR at the current price of $30.83.
TP: Our target prices are $42 and $55 in the next 4-6 months.
SL: To limit risk, place a stop loss at $28. Note that this stop loss is on a closing basis.
Our target potential upside is 36% to 78% in the next 4-6 months. For a risk of $3.03, our target rewards are $11.17 and $24.17. This is a nearly 1:4 and 1:8 risk-reward trade.
In other words, this trade offers nearly 4x to 8x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling edge pattern with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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