The company designated as a non-bank health savings trustee by the IRS, thereby bestowing the right to be the custodian of health savings accounts regardless of which financial institution the funds are deposited with; Healthequity Inc. (NASDAQ: HQY) shows signs of an upcoming price surge according to its latest charts.
#1 Symmetrical Triangle Pattern: As you can see from the daily chart, the stock has been forming a symmetrical triangle pattern.
This pattern represents a period of consolidation before the price breaks out and 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 looks ready for a breakout.
#2 Bullish Stoch: The %K line of the stochastic is currently above the %D line in the daily chart, indicating possible bullishness.
#3 Bullish RSI: The RSI is above 50 and moving up in the daily chart, indicating the strength of the current bullish move.
#4 Uptrend line support: The weekly chart shows that the stock’s prevailing uptrend has remained unbroken, as it has been forming higher highs and higher lows for the past several months. This uptrend line is marked in green color in the chart below.
The stock had taken support at this trend line multiple times before surging higher. The stock seems to be currently moving up after taking support at the uptrend line again. This seems like a bullish sign.
#5 %K above %D in Stochastics: The stochastics oscillator shows that the %K (blue) line is currently above the %D (orange) line in the weekly chart. The indicator is also moving up from oversold levels. All these indicate possible bullishness.
#6 Oversold RSI moving up: The weekly chart shows that the RSI is moving up after reaching oversold levels. 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 shares of HQY above the resistance level of $73. This level is marked as an orange dotted line.
TP: Our target prices are $85 and $100 in the next 4-6 months.
SL: To limit risk, place a stop loss at $67.30. Note that this stop loss is on a closing basis.
Our target potential upside is almost 16% to 37% in the next 4-6 months.
For a risk of $5.70, our target rewards are $12.00 and $27.00. This is an almost 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 5x 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 the sector.
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