The global technology platform for Business Spend Management, Coupa Software Inc. (NASDAQ: COUP) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Pattern: The daily chart of COUP 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 moving up after reaching the bottom rail of the falling wedge pattern. Once the stock breaks out from the top rail of the Falling Wedge Pattern, it has the potential to move further up.
Daily Chart – COUP
#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 pink color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards.
[hana-code-insert name=’adsense-article’ /]#3 Bullish RSI: RSI is currently above 50 and moving up, indicating the strength of the current upmove.
#4 Price above MAs: The stock is currently above both 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#6 Flag Pattern: As seen from the weekly chart, 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).
Weekly Chart – COUP
#7 Stoch – Price bullish divergence: There is a bullish divergence between Stochastic and price as seen in the weekly chart below. While the price formed a lower low, the stochastic formed a higher low. This is marked as blue dotted lines in the weekly chart. The RSI is also moving up after reaching near oversold levels. These are all possible bullish signs.
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 $69.00. For those with higher risk appetite, you can purchase half the intended quantity of the stock at the current price of $62.68.
TP: Our target prices are $80 and $90 in the next 3 to 6 months.
SL: To limit risk, place a stop loss below $59.00 (for entry near $62.68) and $64.00 (for entry near $69.00). Note that this stop loss is on a closing basis.
Our target potential upside is almost 16% to 44% in the next 3-6 months.
- Entry at $62.68: For a risk of $3.68, our first target reward is $17.32 and the second target reward is $27.32. This is a nearly 1:5 and 1:7 risk-reward trade.
- Entry at $68.70: For a risk of $5.00, our first target reward is $11.00 and the second target reward is $21.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 7x 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.
Happy Trading!
Tara
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