The telecommunications company based in the Silicon Valley, California area, Ooma Inc. (NYSE: OOMA) 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 weeks. This indicates consolidation. The consolidation area is marked as an orange color rectangle in the daily chart. A breakout from this consolidation area generally indicates bullishness. Currently, the stock has broken out of the consolidation area, which is a possible bullish sign.
Daily Chart – OOMA
#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 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the daily chart. The stock is also trading above its 50-day SMA. All this usually indicates bullishness.
#6 Ascending Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. The breakout level of the ascending triangle pattern generally acts as a good support level.
#7 Unbroken Uptrend: The weekly chart shows that the stock is still on an uptrend. This uptrend line is marked in pink color. The stock is also trading above both MAs. All these are possible bullish signs.
Weekly Chart – OOMA
#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 is starting to move up from below –DI and +DI lines. The +DI line is 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 OOMA is above yesterday’s close at around $15.50.
Alternatively, you may also purchase the shares of OOMA if it corrects to the breakout level of the ascending triangle pattern at around $14.00.
TP: Our target prices are $20 and $25 in the next 3-6 months.
SL: To limit risk, place a stop loss near $12.70. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 61% in the next 3-6 months.
For a risk of $2.80, our first target reward is $4.50 and the second target reward is $9.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x 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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