The Brentwood, California-based provider of database and analytics-related products and services, Teradata Corporation (NYSE: TDC) seem to be poised for a price surge as per its latest charts.
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, TDC has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in pink color lines. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up. Currently, the stock has broken out of the falling wedge pattern, indicating bullishness.
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the signal line (orange color). This is a possible bullish setup.
This implies that the bulls are currently in control.
These MAs also acts as a good support level.
#4 Ascending Triangle Pattern Breakout: The daily charts also shows that an ascending triangle pattern breakout has occurred.
This is marked in purple color dotted lines.
An Ascending Triangle pattern is a bullish pattern. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the pattern, which is a bullish sign.
#5 Other Bullish Indicators: The RSI shows bullishness, as it is currently above 50. The %K line is above %D in the stochastic. All these are also clear bullish signs.
#6 Flag Pattern: As seen from the weekly chart of TDC, 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 pink 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, indicating bullishness.
#7 MACD above Signal Line: In the weekly chart, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are presently gaining control.
#8 Bullish Stochastic: The weekly chart shows that the %K line is above the %D line in the stochastic. This indicates that an upmove may be imminent.
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 TDC at the current price of $39.92 and the rest if the stock corrects to the breakout level of the falling wedge and ascending triangle pattern at around $38.
TP: Our target prices are $45 and $55 in the next 3-5 months.
SL: To limit risk, place stop-loss at $37.00. Note that the stop loss is on a closing basis.
Our target potential upside is 13% to 45% in the next 3-5 months.
- Entry at $38: For a risk of $1.00, our target rewards are $7.00 and $17.00. This is an almost 1:7 and 1:17 risk-reward trade.
- Entry at $39.92: For a risk of $2.92, our target rewards are $5.08 and $15.08. This is an almost 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 17x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with a 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 sector.