The American sound card and headset manufacturer headquartered in San Diego, California, Turtle Beach Corp (NASDAQ: HEAR) shows signs of an upcoming price surge according to its latest charts.
#1 Falling Wedge Pattern: The daily chart of HEAR shows that the stock has been trading within a falling wedge pattern during the past few months. This is marked in the chart in purple color. Currently, the stock is near the top of the falling wedge pattern. Once the stock breaks out from the Falling Wedge Pattern, it has the potential to move further up.
#2 Double Bottom Pattern: Within the falling wedge pattern, the stock is currently forming a double bottom pattern. This is marked in the daily chart in orange color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards.
#4 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 MACD above Signal Line: In the daily chart, the MACD (light blue color) has currently crossed above the MACD signal line (orange color).
It is also near oversold levels. This indicates a possible bullish setup.
#6 Strong RSI: RSI is above 50 and moving up, indicating strength.
#7 Pennant Pattern: As seen from the weekly chart below, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic pennant pattern and is marked in the chart in purple color. Currently, the stock is trading near the top end of the pennant. A pennant is a continuation pattern. Whenever a stock breaks out of the pennant pattern, it typically continues its previous trend (uptrend in this case).
#8 Fibonacci Bounceback: As shown in the weekly chart, the stock had bounced back from the 50% Fibonacci support level. This level seems like a good support level for the stock.
In addition to these, the weekly chart also has other positive indications like the bullish harami candlestick pattern, and bullish RSI, Stochastic, as well as CCI.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy price for the stock is above the double bottom breakout level at around $22.80. For those with a higher risk appetite, you can purchase half the intended quantity of the stock at the current price of $20.45.
TP: Our target prices are $30 and $35 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $18.60. Note that this stop loss is on a closing basis.
Our target potential upside is almost 32% to 71% in the next 3-6 months.
- Entry at $20.45: For a risk of $1.85, our first target reward is $9.55 and the second target reward is $14.55. This is a nearly 1:5 and 1:8 risk-reward trade.
- Entry at $22.80: For a risk of $4.20, our first target reward is $7.20 and the second target reward is $12.20. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 8X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge pattern. 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.