The American business and financial software company that develops and sells financial, accounting, and tax preparation software and related services for small businesses, accountants, and individuals, Intuit Inc. (NASDAQ: INTU) seems to be poised for a decline in its price in the near term as per its latest charts.
#1 Rising Wedge Pattern Breakdown: The daily chart shows that INTU has recently broken down from a rising wedge pattern that was formed during the past few months. This is a bearish pattern and is marked in purple color in the daily chart. Once a stock breaks down from a rising wedge pattern, it typically moves lower in the near-term.
#2 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
The %K line is also below the %D line.
All these indicate possible bearishness.
#4 Bearish Aroon: The Aroon indicator shows bearishness as the Aroon up is below 30 and the Aroon down is above 70.
#5 Price below MA: The stock is currently trading below the 50-day SMA, which indicates that the bears are currently gaining control.
#6 Resistance level: The daily chart shows that there is a support-turned-resistance level close-by for the stock. This is marked as an orange dotted line. This seems like a good area for the stock to move lower.
#7 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color) in the weekly chart as well, indicating bearishness.
#8 Bearish Divergence between Stoch and Price: The weekly chart shows that there is a bearish divergence between Stochastic and price. This is because while the price was making higher highs, Stoch was forming lower highs. This usually indicates the possibility of an upcoming bearish move. The bearish divergence is marked as pink dotted lines. The %K line is also currently below the %D line in stochastic of the daily chart, indicating bearishness.
#9 Selling pressure: The weekly chart shows that after forming a long-tailed bearish candle, the stock was not able to cross above that level. This level is marked as a blue dotted line in the weekly chart. This is another bearish sign.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for INTU is below $263.50.
TP: Our target prices are $250 and $240 in the next 3-6 months.
SL: To limit risk, place a stop loss at $272.20. Note that this stop loss is on a closing basis.
Our target potential downside is 5% to 9% in the next 3-6 months.
For a risk of $8.70, our target rewards are $13.50 and $23.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.