The Pennsylvania-based commercial provider of weight loss products and services, NutriSystem Inc. (NASDAQ: NTRI) shows signs of an upcoming price surge according to its latest charts.
#1 Symmetrical Triangle Pattern Breakout: As you can see from the daily chart, the stock had recently formed a symmetrical triangle pattern. This pattern is shown as purple color lines. This pattern represents a period of consolidation before the price breaks out and is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, indicating bullishness.
#2 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
[hana-code-insert name=’adsense-article’ /]#3 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#4 Bullish RSI: The RSI is currently above 50.
This indicates the strength of the current upmove and that the stock may move higher in the short-term.
#5 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again.
NTRI had taken support at the 61.8% Fibonacci support level of the upmove, as seen from the weekly chart.
This seems like a good level to bounce back upwards. The price is also above the 50-week and 200-week SMA, indicating that the bulls are now in control.
#6 %K above %D in Stochastics: The stochastics oscillator shows that the %K (blue) line is currently above the %D (orange) line. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase shares of NTRI if it pulls back to reach near the symmetrical triangle pattern’s breakout level. This translates to a price of around $36.50 to $38.
Note: For those with higher risk appetite, you can purchase half the intended quantity of shares of NTRI at the current price of $43.26 and set a stop loss near $41.30.
TP: Our target prices are $45 and $55 in the next 4-6 months.
SL: To limit risk, place a stop loss at $33.90 (for entry near $36.50) and $36.90 (for entry near $38). Note that this stop loss is on a closing basis.
Our target potential upside is almost 18% to 51% in the next 4-6 months.
- Entry at $36.50: For a risk of $2.60, our target rewards are $8.50 and $18.50. This is an almost 1:3 and 1:7 risk-reward trade.
- Entry at $38: For a risk of $1.10, our target rewards are $7.00 and $17.00. This is an almost 1:6 and 1:15 risk-reward trade.
In other words, this trade offers nearly 3x to 15x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle 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.
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