The American radiology firm that operates outpatient diagnostic imaging centers and the largest provider of outpatient imaging services, RadNet Inc. (NASDAQ: RDNT) seems to be getting ready for a price bump according to the charts.
Bullish Move – Chart Indications
#1 Channel Breakout: As you can see from the daily chart, the stock was trading within a channel for the past several weeks. This is shown in purple color. The stock had typically taken support at the lower rail of the channel before bouncing back. The stock has currently broken out of the channel with high volume, which is a possible bullish sign.
Daily Chart – RDNT
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 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.
#4 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#5 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the daily chart.
This is a possible bullish indication.
#6 IH&S Pattern: From the weekly chart, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern. This is marked in the chart in pink color. An IH&S pattern is a bullish pattern. A breakout from an IH&S pattern is usually the sign of an upcoming bullish move. Currently, the stock has broken out of the IH&S pattern, indicating possible bullishness.
Weekly Chart – RDNT
#7 Bullish ADX and DI: The ADX indicator shows bullishness in the weekly chart because (+DI) is greater than (-DI), ADX is above (-DI), and ADX has started rising from below both (+DI) and (-DI).
#8 Bullish MACD: The MACD line is above the signal line in the weekly chart as well, indicating a possible bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy area for RDNT is between $15.80 to $16.50. However, you can purchase half the intended quantity of shares of RDNT if it trades above Friday’s close. This translates to a price above $18.00.
TP: Our target prices are $24 and $28 in the next 3-6 months.
SL: To limit risk, place a stop loss below $16.30 (for entry near $18) and $13.40 (for entry near $15.80-$16.50). Note that the stop loss is on a closing basis.
Our target potential upside is nearly 33% to 75% in the next 3-6 months.
- Entry near $18.00: For a risk of $1.70, our target rewards are $6.00 and $10.00. This is a 1:3 and 1:6 risk-reward trade.
- Entry near $16.00: For a risk of $2.60, our target rewards are $8.00 and $12.00. This is a 1:3 and 1:5 risk-reward trade.
In other words, this trade offers almost 3x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel and goes below it. 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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