The international financial technology company that operates an electronic trading platform for the institutional credit markets, and also provides market data and post-trade services, MarketAxess Holdings Inc. (NASDAQ: MKTX) seem to be ready for a price correction according to its latest charts.
Bearish Indications
#1 Rising Wedge Pattern: The daily chart shows that the stock has been forming a rising wedge pattern during the past few months. This is a bearish pattern and is marked in purple color lines in the daily chart. Once the stock breaks down from the rising wedge pattern, it has the potential to move lower in the near-term.
Daily Chart – MKTX
#2 Shooting Star: The stock has currently formed a shooting star pattern in the daily chart. This is marked as a pink ellipse. This is a bearish reversal candlestick pattern and indicates that there is a selling pressure at higher prices.
[hana-code-insert name=’adsense-article’ /]#3 Bearish Stochastic: In the daily chart, the stochastic is currently moving down from overbought levels.
The %K line has also crossed below the %D line. All these indicate possible bearishness.
#4 Bearish RSI: The RSI is currently moving down after reaching overbought levels in the daily chart.
This is a possible bearish indication.
#5 Bearish Divergence between CCI and Price: The weekly chart shows that there is a bearish divergence between CCI and price.
This is because while the price was making higher highs, CCI was forming lower highs.
This usually indicates the possibility of an upcoming bearish move. This bearish divergence is marked as pink dotted lines.
Weekly Chart – MKTX
#6 Shooting Star: The weekly chart is also currently forming a shooting star pattern. This is marked as an orange ellipse. This bearish reversal candlestick pattern typically occurs at the top of uptrends and indicates that there is a selling pressure at higher prices.
#7 Bearish Bollinger Band: The weekly chart shows that a candle is being formed above the upper band of the Bollinger band. This is usually a sell signal and indicates that the stock may move lower in the near-term.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can sell the shares of MKTX at the current price of $246.68.
TP: Our first target price is $235 and if the stock closes below this price, the second target price is $225 in the next 3-6 months.
SL: To limit risk, place a stop loss at $252. Note that this stop loss is on a closing basis.
Our target potential downside is 5% to 9% in the next 3-6 months. For a risk of $5.32, our target rewards are $11.68 and $21.68. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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