The American technology company that develops and markets software as a service for clinical trials, Medidata Solutions Inc. (NASDAQ: MDSO) seem to be gearing up for a surge as per its latest charts.
#1 Channel breakout: The daily chart shows that the stock had formed a trend channel in the last few months. This is marked in purple color. Currently, the stock has broken out of this trend channel, which is a possible bullish sign.
#2 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs.[hana-code-insert name=’adsense-article’ /]This pattern is marked on the daily chart as pink dotted lines.
The breakout from a symmetrical triangle pattern usually signifies a bullish move.
#3 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA.
This usually implies a possible bullish bias for the stock.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 Bullish RSI: The RSI is above 50 and moving up, indicating possible bullishness.
#6 Double Bottom Pattern: The stock has been recently forming a double bottom pattern, which is a bullish reversal pattern. This is marked in orange color in the weekly chart. Once the stock breaks out from this double bottom pattern, it could possibly move upwards.
#7 MACD above Signal Line: The weekly chart shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.
#8 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart as well, indicating possible bullishness.
#9 Price above MAs: The weekly chart shows that the stock price is currently above both the 50-week as well as the 200-week SMA. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of MDSO at the current price of $76.25.
TP: Our target prices are $86 and $95 in the next 3-6 months.
SL: To limit risk, place a stop loss at $71.80. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 13% to 26% in the next 3-6 months. For a risk of $4.45, the target rewards are $9.75 and $18.75. 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 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 its sector.
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