The American restaurant and entertainment business headquartered in Dallas, Dave & Buster’s Entertainment Inc. (NASDAQ: PLAY) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Breakout from Consolidation Area: The daily chart shows that the stock has been trading within a range since the past several months. This indicates consolidation. The consolidation area is marked as a purple color rectangle in the daily chart. A breakout from this consolidation area generally indicates bullishness.
Daily Chart – PLAY
#2 Above MAs: The stock is currently trading above its shorter-term moving average of 50-day SMA as well as its longer-term moving average of 200-day SMA. This indicates overall bullishness for the stock.
#3 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color).
This indicates a possible bullish setup.
#4 Bullish ADX: The ADX line has started to move up from below –DI and +DI lines.
The +DI line as well as the ADX line are also currently above –DI line.
This indicates possible bullishness.
#5 Double Bottom pattern: PLAY’s weekly chart shows that the stock has been forming a double bottom pattern. A double bottom pattern is a bullish pattern and is marked in the chart in orange lines. A breakout from this pattern usually indicates the start of a bullish move.
Weekly Chart – PLAY
#7 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the weekly chart. The stock is also trading above its 50-day SMA. All this usually indicates bullishness.
#8 Bullish MACD: The MACD line is above the signal line in the weekly chart too, indicating a possible bullish bias.
#9 Bullish ADX: The ADX line has moved up from below –DI and +DI lines. The +DI line as well as the ADX line are also currently above –DI line. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for PLAY is if it closes above the gap resistance level of around $51.70.
TP: Our target prices are $60 and $70 in the next 3-6 months.
SL: To limit risk, place a stop loss near $48.10. Note that the stop loss is on a closing basis.
Our target potential upside is 16% to 35% in the next 3-6 months.
For a risk of $3.60, our first target reward is $8.30 and the second target reward is $18.30. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the consolidation area with 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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