The Chicago-based telecommunications service company providing wireless products and services; cable and wireline broadband, TV and voice services; and hosted and managed services to approximately 6 million customers in America, Telephone & Data Systems, Inc. (NYSE: TDS) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart of TDS shows that the stock was trading within a falling wedge pattern during the past few months. This pattern is marked in the daily chart in pink color. The stock has currently broken out from it. Once a stock moves breaks out from a bullish pattern like the Falling Wedge Pattern, it has the potential to move further up.
Daily Chart – TDS
#2 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#4 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color).
This is a possible bullish setup.
#5 Bullish ADX and DI: The ADX line is starting to move up from below –DI and +DI lines. The +DI line is also currently above –DI line.
This indicates possible bullishness.
#6 Flag Breakout: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern and is marked in the chart in pink color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). Typically, a retest of the flag pattern’s breakout level happens before resuming the trend.
Weekly Chart – TDS
#7 Bullish RSI: The RSI is above 50 and moving up in the weekly chart. This indicates possible bullishness.
#8 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the weekly chart as well. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of shares of TDS at the current price of $33.51. The rest can be purchased if the stock corrects to the breakout level of the falling wedge pattern at around $32.
TP: Our target prices are $38 and $45 in the next 4 to 6 months.
SL: To limit risk, place a stop loss below $29.70 (for entry near $32) and $30.50 (for entry near $33.51). Note that this stop loss is on a closing basis.
Our target potential upside is almost 14% to 41% in the next 4-6 months.
- Entry at $32: For a risk of $2.30, our first target reward is $6.00 and the second target reward is $13.00. This is a 1:3 and 1:6 risk-reward trade.
- Entry at $33.51: For a risk of $3.01, our first target reward is $4.49 and the second target reward is $11.49. This is a 1:2 and 1:4 risk-reward trade.
Overall, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge 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 the sector.
Happy Trading!
Tara
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