The Communications Platform as a Service company that sells software application programming interfaces for voice and messaging using their own IP voice network, Bandwidth Inc. (NASDAQ: BAND) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock was recently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts as a good support level. Currently, the stock has broken out of the ascending triangle pattern, which is usually a bullish sign.
Daily Chart – BAND
#2 Trading Above MAs: The stock is currently trading above its short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA, which implies that the bulls are currently in control.
#3 Bullish ADX and DI: 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.
#4 Bullish RSI: The RSI is currently above 50 and moving higher, indicating possible bullishness.
#5 Unbroken Uptrend: The weekly chart shows that the stock’s uptrend remains unbroken.
This is because it has been forming higher highs and higher lows for the past several months.
The uptrend line has been marked in the weekly chart in purple color.
Weekly Chart – BAND
#6 Above MA: The stock is currently trading above the 50-week SMA in the weekly chart. This indicates that the bulls are still in control.
#7 Bullish ADX and DI: In the weekly chart as well, the ADX indicator shows bullishness, as the (+DI) line is currently trading above the (-DI) line.
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of BAND if it corrects to the breakout level of the ascending triangle pattern. This translates to a price of around $90.
TP: Our target prices are $105 and $120 in the near-term.
SL: To limit risk, place a stop loss near $80. Note that this stop loss is on a closing basis.
Our target potential upside is 17% to 33% in the next 3-6 months.
For a risk of $10, the target rewards are $15 and $30. This is a nearly 1:2 and 1:3 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 with high volume from the ascending 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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