The company that engages in the manufacture, procurement, packaging, and distribution of pet health and wellness products, PetIQ Inc. (NASDAQ: PETQ) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart of PETQ 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 breaks out from a bullish pattern like the Falling Wedge Pattern, it has the potential to move further up.
Daily Chart – PETQ
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the MACD signal line (orange color). This is a possible bullish setup.
#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 has moved up from below (-DI) and (+DI).
#5 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the daily chart. This is a possible bullish sign.
#6 Double bottom pattern: The weekly chart shows that the stock is forming a double bottom pattern. This is marked in orange color. A double bottom pattern is a strong bullish pattern and a breakout from it indicates that the stock may move higher in the short term.
Weekly Chart – PETQ
#7 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the weekly chart as well. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for PETQ is if it corrects to the range between $25.60 to $27.80.
However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of PETQ at the current price of $29.65.
TP: Our target prices are $35 and $42 in the next 4 to 6 months.
SL: To limit risk, place a stop loss below $24.20 (for entry between $25.60 to $27.80) and $26.00 (for entry near $29.65). Note that this stop loss is on a closing basis.
Our target potential upside is almost 18% to 58% in the next 4-6 months.
- Entry near $29.65: For a risk of $3.65, our first target reward is $5.35 and the second target reward is $12.35. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $26.50: For a risk of $2.30, our first target reward is $8.50 and the second target reward is $15.50. This is a nearly 1:4 and 1:7 risk-reward trade.
Overall, this trade offers nearly 2x to 7x 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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