The well-known operator of international and bilingual K-12 schools and one of the largest education groups in China, Bright Scholar Education Holdings Ltd-ADR (NYSE: BEDU) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern during the past few months. This is marked as purple color lines. The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – BEDU
#2 Bullish MACD: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
[hana-code-insert name=’adsense-article’ /]The MACD is also near oversold levels, which is a bullish sign.
#3 Bullish RSI: The RSI is currently near 50 after moving up from oversold levels, indicating bullishness.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 CCI-Price Bullish Divergence: There is a bullish divergence between CCI and price in the weekly chart.
While the price formed a lower low, the CCI formed to a higher low. This is marked as pink dotted lines in the weekly chart. This is a bullish sign.
Weekly Chart – BEDU
#6 Bullish Stoch: The %K line of the stochastic is currently above the %D line in the weekly chart. This indicates that the stock may move higher.
#7 Bullish RSI: The RSI is currently moving up after reaching oversold levels. This indicates that the price may reverse to upside soon.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of the BEDU at the current price of $11.87 and the rest if it crosses above the long-term resistance level (marked as a green dotted line in the daily chart) of $13.
TP: Our target prices are $20 and $25 in the next 4-6 months.
SL: To limit risk, place a stop loss below $9.00. Note that the stop loss is on a closing basis.
Our target potential upside is 53% to 110% in the next 4-6 months.
· Entry at $11.87: For a risk of $2.87, our first target reward is $8.13 and the second target reward is $13.13. This is a nearly 1:3 and 1:5 risk-reward trade.
· Entry at $13: For a risk of $4.00, our first target reward is $7.00 and the second target reward is $12.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge 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 the sector.
Happy Trading!
Tara
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