The public US medical device manufacturer based in San Diego, CA, that develops medical technologies for the treatment of diabetes and specifically insulin infusion therapy, Tandem Diabetes Care Inc. (NASDAQ: TNDM) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Flag Pattern Breakout: As seen from the daily chart of TNDM, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic flag pattern and is marked in the chart in purple color. A flag is a continuation pattern. Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern. This is a possible sign of an upcoming bullish move.
Daily Chart – TNDM
#2 Double Bottom Pattern: From the daily chart, we can see that the stock is currently forming a Double Bottom pattern. This is marked in the chart in orange color. A double bottom pattern is a strong bullish pattern and a breakout from the pattern indicates a possible upmove in the short term.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: 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.#4 Strong RSI: Relative strength index (RSI) is currently above 50 after moving up from oversold levels.
This indicates the strength of the current upmove.
#5 Bullish Stochastic: Currently, the %K line of the stochastic is above the %D line, indicating bullishness.
#6 Trendline Support: The stock has currently taken support at the uptrend line (marked as a green dotted line) before continuing its upmove. This looks like a good support level.
#7 Rounding Bottom Pattern Breakout: As seen from the weekly chart, the stock has broken out of a rounding bottom pattern. This pattern is marked in purple color. A Rounding Bottom (saucer bottom) is a long-term reversal pattern. It represents a long consolidation period that turns from a bearish bias to a bullish bias. A breakout from this pattern indicates that the stock may move higher.
Weekly Chart – TNDM
#8: Bullish CCI: In the weekly chart, CCI is moving up from below -100. This is a bullish sign as well.
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 TNDM at the current price of $37.61. The rest of the shares can be purchased if the stock breaks out above the double bottom pattern at around $40.40.
TP: Our target prices are $50 and $65 in the next 3-6 months.
SL: To limit risk, place a stop loss near $34.50. Note that the stop loss is on a closing basis.
Our target potential upside is 23% to 73% in the next 3-6 months.
- Entry at $37.61: For a risk of $3.11, our first target reward is $12.39 and second target reward is $27.39. This is a nearly 1:4 and 1:9 risk-reward trade.
- Entry at $40.40: For a risk of $5.90, our first target reward is $9.60 and second target reward is $24.60. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the flag 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 energy sector.
Happy Trading!
Tara
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