The education company that sells online schooling and curricula, K12 Inc. (NYSE: LRN) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Channel Breakout: The daily chart of LRN shows that the stock has been trading within a channel for the past few months. This channel is marked in the daily chart in pink color. Currently, the stock has broken out of this channel, indicating that it has the potential to surge ahead.
Daily Chart – LRN
#2 Triple Bottom Breakout: In the daily chart, we can see that the stock has currently broken out of a triple bottom pattern. This pattern is marked in the chart in purple color. A triple bottom pattern is a strong bullish pattern and indicates that the stock may move higher in the short term.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color).
This is a possible bullish setup.
#4 Bullish ADX: The ADX line has started to move up from below –DI and +DI lines.
The +DI as well as ADX lines are also currently above –DI line.
This indicates possible bullishness.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#6 Above MA: The stock is currently trading above its 50-day SMA, indicating the overall bullishness of the stock.
#7 Bullish Engulfing: The latest candlestick pattern in the weekly chart is a bullish engulfing pattern which is a bullish reversal candle. This is marked as an orange ellipse in the chart. We can see that last week’s small red candle is engulfed by the latest week’s big green candle. Once the bullish engulfing pattern is formed after a downtrend, the stock usually starts moving up. This implies that the stock may move higher soon.
Weekly Chart – LRN
#8 MACD above Signal Line: As you can see from the weekly chart, the MACD line (blue color) has currently crossed above the signal line (orange color). This indicates a possible bullish bias.
#9 Oversold RSI: The RSI is currently moving up after reaching oversold levels. It is nearing 50, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for LRN is around $20.80 to $21.00.
TP: Our target prices are $25 and $30 in the next 3-6 months.
SL: To limit risk, place a stop loss at $18.40. Note that this stop loss is on a closing basis.
Our target potential upside is almost 19% to 43% in the next 3-6 months.
For a risk of $2.60, our target rewards are $4.00 and $9.00. This is almost 1:2 and 1:4 risk-reward trade.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the channel. 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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