The company that offers Japanese cuisine and a revolving sushi service model, and operates revolving sushi bar restaurants in the United States, Kura Sushi USA Inc. (NASDAQ: KRUS) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock was forming a symmetrical triangle pattern. This pattern is shown as pink color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out.
This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, which is a possible bullish sign.
Daily Chart – KRUS
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA. This is a possible bullish sign.
#3 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) lines are above (-DI), and ADX has started to move up from below (-DI).
#6 Above Resistance Level: The weekly chart shows that the stock has currently broken out of a resistance level and is moving higher. The resistance level is shown in the purple color dotted line. This is a possible bullish indication.
Weekly Chart – KRUS
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well. The indicator is also moving up from oversold levels. All these are possible bullish signs.
#8 Bullish RSI: The weekly chart shows that RSI is currently above 50 and moving higher, which is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for KRUS is if it crosses above $20.00.
TP: Our target prices are $25 and $30 in the next 4-6 months.
SL: To limit risk, place stop-loss at $16.80. Note that the stop-loss is on a closing basis.
Our target potential upside is 25% to 50% in the next 4 to 6 months.
For a risk of $3.20, our target rewards are $5.00 and $10.00. 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 from the symmetrical triangle 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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