The semiconductor company that is one of the market leaders in MEMS timing, SiTime Corp (NASDAQ: SITM) seem to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock was trading within a downtrend channel during the past few weeks. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
Daily Chart – SITM
#2 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX has started to move up from below both (+DI) and (-DI).
#3 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#4 Bullish RSI: The RSI is currently above 50 and moving up in the daily chart, this is a possible bullish indication.
#5 Near Support Area: As you can see from the daily chart, the stock had recently moved up from a long-term support level.
This level is marked as an orange dotted line.
This is the same level at which the stock had formed its previous low in December 2019. This is a possible bullish sign.
#6 Above Resistance level: The weekly chart shows that the stock has closed above a nearby resistance level and is currently trading above it. This is marked as a green color dotted line in the chart. This seems like a good support area for the stock.
Weekly Chart – SITM
#7 Other Bullish indications: The weekly chart shows that the RSI is above 50 and moving up. The ADX and +DI lines are also above the -DI lines. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal entry level for SITM is if the stock corrects to the channel breakout level at around $20.00.
However, you may also purchase the shares of SITM if it trades above the resistance level of $25.80.
TP: Our target prices are $25 and $30 in the next 4-6 months.
SL: To limit risk, place stop-loss at $16.60 (for entry near $20) and $23.10 (for entry near $25.80). Note that the stop-loss is on a closing basis.
Our target potential upside is 16% to 50% in the next 4 to 6 months.
- Entry at $20: For a risk of $3.40, our target rewards are $5.00 and $10.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at $25.80: For a risk of $2.70, our target reward (TP#2) is $4.20. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level with a 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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