The American advanced technology company founded in 1990 by three MIT graduates who designed robots for space exploration and military defense, iRobot Corporation (NASDAQ: IRBT) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in pink color. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
Daily Chart – IRBT
#2 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI).
[hana-code-insert name=’adsense-article’ /]#3 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.
#4 Above MAs: In the daily chart of IRBT, the stock is currently trading above both 50-day and 200-day SMA.
This implies that the bulls are currently in control.
However, the daily chart also shows that the RSI is currently near overbought levels and moving down.
This points to the possibility of a near-term decline in price before the next upmove.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#6 Cup and Handle pattern breakout: The weekly chart shows that the stock has currently broken out of a cup and handle pattern. This pattern is marked in the chart in purple color. A cup and handle pattern is a consolidation and breakout pattern and a breakout from it indicates that the stock may move higher in the short term.
Weekly Chart – IRBT
#7 MACD above Signal Line: The weekly chart shows that the MACD line (blue color) is currently above the signal line (orange color). This is a possible bullish setup.
#8 Strong Stochastic: The %K line is above the %D line in stochastic and is moving up, indicating possible bullishness.
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 stocks of IRBT at the current price of $125.06 and the rest if the stock corrects to the support area of around $115.
TP: Our target prices are $135 and $150 in the next 4-6 months.
SL: To limit risk, place stop-loss at $105.30 (for entry near $115) and $118.80 (for entry near $125.06). Note that the stop loss is on a closing basis.
Our target potential upside is 8% to 30% in the next 4-6 months.
- Entry at $115: For a risk of $9.70, our target rewards are $20.00 and $35.00. This is a 1:2 and 1:4 risk-reward trade.
- Entry at $125.06: For a risk of $6.26, our target rewards are $9.94 and $24.94. 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 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.
Happy Trading!
Tara
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