The online pet pharmacy based in the United States that sells prescription and non-prescription pet medication, Petmed Express Inc. (NASDAQ: PETS) seems to be poised for a price surge according to its charts.
Bullish Indications
#1 Rounding Bottom Pattern breakout: The daily charts shows that the stock has broken out of a rounding bottom pattern. This pattern is marked in orange color. A breakout from a bullish pattern like rounding bottom indicates that the trend may soon have a bullish bias.
Daily Chart – PETS
#2 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
[hana-code-insert name=’adsense-article’ /]#3 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#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 Bullish ADX: 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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend line. This line is shown in purple color in the chart below. This is a possible bullish sign.
Weekly Chart – PETS
#7 Bullish MACD: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#8 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines in the weekly chart. The +DI line is also currently above –DI as well as ADX line. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal entry level for PETS is if it corrects to around $22 to $24.
But for those with a higher risk appetite, you can purchase half the intended quantity of shares of PETS at the current price of $26.
TP: Our target prices are $32 and $40 in the next 4-6 months.
SL: To limit risk, place a stop loss at $18.60 (for entry near $22 to $24) and $22.40 (for entry near $26). Note that this stop loss is on a closing basis.
Our target potential upside is almost 23% to 82% in the next 4-6 months.
- Entry near $22: For a risk of $3.40, our target rewards are $10.00 and $18.00. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry near $24: For a risk of $5.40, our target rewards are $8.00 and $16.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $26: For a risk of $3.60, our target rewards are $6.00 and $14.00. This is a nearly 1:2 and 1:4 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 rounding bottom 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
[hana-code-insert name=’stansberry-article’ /]