The American software company that develops and provides commercial support for the open-source database MongoDB, a NoSQL database that stores data in JSON-like documents with flexible schemas, Mongodb Inc. (NASDAQ: MDB) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has been forming a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as pink color lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
Daily Chart – MDB
#2 IH&S Pattern Breakout: As you can see from the daily chart, the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
#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 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 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 bullishness.
#6 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 as a potential buy signal.
#7 Fibonacci Level Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 61.8% Fibonacci support level of the upmove and is currently above the 78.6% Fibonacci level, as seen from the weekly chart. This looks like a good area for the stock to surge higher.
Weekly Chart – MDB
#8 MACD above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal entry level for MDB is if the stock trades above yesterday’s close. This translates to a price of around $167.45.
TP: Our target prices are $175 and $190 in the next 3-6 months.
SL: To limit risk, place a stop loss at $162.80. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 5% to 14% in the next 3-6 months.
For a risk of $4.60, the target rewards are $7.55 and $22.55. This is a nearly 1:2 and 1:5 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 IH&S pattern and symmetrical triangle 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 its sector.
Happy Trading!
Tara
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