The well-known online company that provides online file storage and sharing services, Dropbox Inc. (NASDAQ: DBX) seems to be getting ready for a price surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as pink color lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern, which is a possible bullish sign.
Daily Chart – DBX
#2 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: The MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#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 IH&S Pattern Breakout: As you can see from the weekly chart, the stock is currently forming an Inverted Head and Shoulders (IH&S) pattern.
This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
Weekly Chart – DBX
#6 Other Bullish Signs: The weekly chart shows that the MACD line is above the signal line, the Aroon up is above 70 while the Aroon down is below 30, and the price is above the 50-week SMA. The RSI is currently above 50 and moving up. All these points to a bullish bias for the stock.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of DBX if the stock closes above the resistance level of around $27.
TP: Our target prices are $35 and $45 in the next 3-6 months.
SL: To limit risk, place stop loss at $21.70. Note that stop loss is on a closing basis.
Our target potential upside is 30% to 67% in the next 3-6 months.
For a risk of $5.30, our target rewards are $8.00 and $18.00. This is a 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern breakout 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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