The popular Chinese human-resources service provider, 51job Inc. (NASDAQ: JOBS) shows signs of an upcoming price surge according to its latest charts.
#1 Falling Wedge Breakout: The daily chart of JOBS shows that the stock was trading within a falling wedge pattern during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of this falling wedge pattern. A breakout from a bullish pattern like Falling Wedge Pattern shows that the stock has gained momentum and has the potential to move further up.
#2 RSI Moving Up: In the daily chart, the RSI is above 50 and moving up. This indicates that the stock may move higher.
The stock is also currently trading near its 50-day SMA which is another positive sign.
#4 Bullish Stochastic: In the daily chart, the %K line (blue color) is above the %D line (orange color) in the stochastic, indicating bullishness.
#5 Support near 38.2% Fibonacci Level: The weekly chart shows that the stock was on an uptrend after which it has been correcting.
It then took support at the 38.2% Fibonacci retracement level of this move. Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before resuming its upmove. So, this retracement level seems like a good support area.
#6 RSI Oversold: The RSI is moving up from oversold levels, indicating bullishness.
#7 Bullish Stochastic: In the weekly chart as well, the %K line (blue color) is above the %D line (orange color) in the stochastic, indicating bullishness.
#8 Flag Pattern: The weekly chart also shows that the stock has been forming a flag pattern (marked in purple color). A flag is a bullish pattern and a breakout from this pattern typically causes the stock to move higher.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of JOBS at the current price of $68.17.
TP: Our target prices are $80 and $90 in the next 3-6 months.
SL: To limit risk, place a stop-loss at $62.30. Note that this stop loss is on a closing basis.
Our target potential upside is almost 17% to 32% in the next 3-6 months. For a risk of $5.87, our target rewards are $11.83 and $21.83. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x 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.