The multinational internet service provider whose primary services consist of Internet access and data transport, offered on a fiber optic, IP data-only network, along with colocation in data centers, Cogent Communications Holdings Inc. (NASDAQ: CCOI) seem to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Flag Pattern: The stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in purple color in the daily chart. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case.
#2 RSI Oversold: The daily chart of CCOI shows that the RSI is currently moving up after reaching oversold levels. This points to a possible reversal.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Engulfing: The daily chart shows that the latest candlestick pattern is a bullish engulfing pattern.
This is marked as a pink ellipse in the daily chart.
This is a bullish pattern and indicates that the price may move higher in the short term.
#4 Strong Stochastics: The stochastics oscillator shows that the %K (blue) line is currently above the %D (orange) line and moving up.
It is also moving up after reaching oversold levels. All this indicates a possible reversal from the current short-term downtrend.
#5 RSI -Price Bullish Divergence: There is a bullish divergence between RSI and price in the daily chart. While the price formed a lower low, the RSI formed to a higher low. This is marked as blue dotted lines in the chart. A bullish divergence is usually the sign of a possible upmove in the near-term.
#6 Hammer pattern: In the weekly chart, the latest candle is a hammer which is a bullish reversal candle.
#7 Good Support Level Nearby: There is a good support level nearby for the stock. This resistance-turned-support level is marked as a green dotted line. This seems like a good level for the stock to bounce upwards.
#8 Candle near lower Bollinger band: The latest weekly candle is below the lower band of the Bollinger band. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of CCOI at the current price of $56.24 and the rest if the stock closes above $60.
TP: Our target prices are $65 and $70 in the next 3-6 months.
SL: To limit risk, place stop-loss at $50.80 (for entry near $56.24) and $54.80 (for entry near $60). Note that stop loss is on a closing basis.
Our target potential upside is 15% to 38% in the next 3-6 months.
- Entry near $56.24: For a risk of $5.44, our target rewards are $8.76 and $18.76. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $60: For a risk of $5.20, our target reward (TP#2) is $15.00. This is a 1:3 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 from the flag pattern 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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