The provider of customized systems and solutions serving customers with data networking and operational requirements, RigNet Inc. (NASDAQ: RNET) seem to be poised for a price surge after a correction as per its latest charts.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in pink color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from it, it has the potential to move further up.
Daily Chart – RNET
#2 Strong RSI: The daily chart shows that RSI is above 50 and moving up, indicating strength. However, RSI is now near overbought levels, indicating that the price may move down in the short term before starting the upmove again.
[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 risen up from below both (+DI) and (-DI).
#5 Downtrend Broken in Weekly Chart: As evident from the weekly chart, the stock was in a downtrend since the past several months.
This is marked in purple color line. The stock has since then broken out of the downtrend and started a new upwards move.
Weekly Chart – RNET
#6 MACD above Signal Line: The weekly chart shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for RNET is if it corrects to the breakout level of the downtrend channel at around $14.30. For those with a higher risk appetite, you can enter long positions if the stock corrects to the long-term support level of $19.20.
TP: Our target prices are $28 and $38 in the next 4-6 months.
SL: To limit risk, place stop-loss at $12.80 (entry near $14.30) $17.10 (entry near $19.20). Note that the stop-loss is on a closing basis.
Our target potential upside is 46% to 166% in the next 4 to 6 months.
- Entry at $14.30: For a risk of $1.50, our target rewards are $13.70 and $23.70. This is a 1:9 and 1:16 risk-reward trade.
- Entry at $19.20: For a risk of $2.10, our target rewards are $8.80 and $18.80. This is a 1:4 and 1:9 risk-reward trade.
In other words, this trade offers nearly 4x to 16x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level with a 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 the sector.
Happy Trading!
Tara
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