The insurance company headquartered in Westlake, Texas, Goosehead Insurance Inc. (NASDAQ: GSHD) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: GSHD’s daily chart shows that the stock had broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – GSHD
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates possible bullishness.
#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) and (+DI).
#6 Pennant Pattern Breakout: As seen from the weekly chart, the stock was in an uptrend after which it started consolidating and was in a narrowing range. This is a classic pennant pattern and is marked in the chart in purple color. A pennant is a continuation pattern. Whenever a stock breaks out of the pennant pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the pennant pattern. This is a possible sign of an upcoming bullish move.
Weekly Chart – GSHD
#7 MACD above Signal Line: In the weekly chart, the MACD line has crossed above the MACD signal line which is a bullish signal. The stock is also trading above both 50-week SMA, indicating that the bulls are still in control.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level is if the stock corrects back to the breakout level of the ascending triangle pattern at around $35.
Note: For those looking for a speedier entry, you can purchase one-fourth of the intended quantity of shares at the current price of $40.09.
TP: Our target prices are $42 and $50 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $31.10. Note that this stop loss is on a closing basis.
Our target potential upside is 20% to 43% in the next 3-6 months. For a risk of $3.90, the target rewards are $7.00 and $15.00. 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 ascending triangle breakout level. 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.
Happy Trading!
Tara
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