The largest operator of membership warehouse clubs in Central America and the Caribbean, PriceSmart, Inc. (NASDAQ: PSMT) seem to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
Daily Chart – PSMT
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA. This is a possible bullish sign.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#4 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has moved up from below (-DI).
#6 Symmetrical Triangle Pattern: The weekly chart shows that the stock has been forming a symmetrical triangle pattern.
This pattern is shown as pink lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend. Currently, the stock is near the upper rail of the pattern.
Weekly Chart – PSMT
#7 MACD above Signal Line: The weekly chart of NEP shows that the MACD (light blue color) is currently above the MACD signal line (orange color). This typically indicates a bullish setup.
#8 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PSMT above the resistance level of $65.20.
TP: Our target prices are $70 and $75 in the next 4-6 months.
SL: To limit risk, place stop-loss at $62.40. Note that the stop-loss is on a closing basis.
Our target potential upside is 7% to 15% in the next 4 to 6 months. For a risk of $2.80, our target rewards are $4.80 and $9.80. 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 downtrend channel breakout level 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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