The pet insurance provider based in Seattle, Washington, that offers and administers cat and dog insurance in the United States, Canada, and Puerto Rico, Trupanion Inc. (NASDAQ: TRUP) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart of TRUP shows that the stock was trading within a falling wedge pattern during the past few months. This pattern is marked in the daily chart in pink color. The stock has currently broken out from it. Once the stock moves breaks out from a bullish pattern like the Falling Wedge Pattern, it has the potential to move further up.
Daily Chart – TRUP
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
[hana-code-insert name=’adsense-article’ /]#3 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.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is moving up from below (-DI) and (+DI).
#5 MACD -Price Bullish Divergence: The daily chart shows that there is a bullish divergence between MACD and price.
While the price formed a lower low, the MACD formed 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 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. TRUP had taken support at the 38.2% Fibonacci support level of the upmove, as seen in the weekly chart. This is a possible bullish sign.
Weekly Chart – TRUP
#7 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the weekly chart. This is a possible bullish sign.
#8 Bullish MACD: The MACD line (blue color) is currently above the MACD signal line (orange color) in the weekly chart as well. This indicates a possible bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of TRUP at the current price of $29.62.
TP: Our target prices are $36 and $45 in the next 4 to 6 months.
SL: To limit risk, place a stop loss below $25.60. Note that this stop loss is on a closing basis.
Our target potential upside is almost 22% to 52% in the next 4-6 months.
For a risk of $4.02, our first target reward is $6.38 and the second target reward is $15.38. This is a nearly 1:2 and 1:4 risk-reward trade.
Overall, 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 with high volume from the falling wedge 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
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