The company that provides big data predictive analytics, artificial intelligence and telehealth, and human intervention services to health plans and other third-party payors, Catasys, Inc. (NASDAQ: CATS) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Above support area: The daily chart shows that the stock has currently broken out of a long-term support area. This is marked as a pink color dotted line. This seems like a good area for the stock to surge higher.
Daily Chart – CATS
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#3 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 bullish.
#4 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.
#5 Bullish ADX: The ADX line is currently moving up from below –DI and +DI lines.
The +DI and ADX lines are also currently above –DI line. This indicates possible bullishness.
#6 Unbroken Uptrend: The weekly chart shows that the stock is still on an uptrend, as it has been forming higher highs and higher lows. The uptrend line is shown in purple color. This is a possible bullish sign.
Weekly Chart – CATS
#7 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the weekly chart. 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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of CATS is if it corrects to the long-term support level of around $20.50. However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of CATS if it trades above $24.50.
TP: Our target prices are $28 and $34 in the next 4 to 6 months.
SL: To limit risk, place a stop loss around $22.40 (for entry near $24.50) and $15.40 (for entry near $20.50). Note that this stop loss is on a closing basis.
Our target potential upside is 14% to 66% in the next 3-5 months.
- Entry near $20.50: For a risk of $5.10, the target rewards are $7.50 and $13.50. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $24.50: For a risk of $2.10, the target rewards are $3.50 and $9.50. 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 support area. 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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