The company that provides consumable materials to semiconductor manufacturers, and pipeline and adjacent industry customers worldwide, Cabot Microelectronics Corporation (NASDAQ: CCMP) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Below Resistance Area: The daily chart shows that the stock is currently trading below a long-term resistance area. This area is marked as an orange color dotted line. Despite multiple attempts, the stock was unable to sustain a breakout above this level. This indicates that there is a distribution happening at this level, which is a possible bearish indication.
Daily Chart – CCMP
#2 CCI Moving Down: The CCI is currently moving down after crossing above 200. This usually means that the stock may reverse to the downside soon.
#3 Bearish Stoch: The daily chart shows that the stochastic is currently near overbought levels and moving down.
The %K line has also crossed below the %D line.
All these indicate possible bearishness.
#4 Bearish RSI: The RSI is currently moving down from oversold levels, which is a possible bearish sign.
#5 CCI-Price bearish divergence: The daily chart shows that there is a bearish divergence between CCI and price. This is marked as blue dotted lines. While the price was making higher highs, CCI was forming lower highs. This is a possible bearish sign.
#6 Supply area: The weekly chart shows that the stock is currently near a supply area, as it was not able to cross above the resistance level even after multiple attempts. This area is marked as a blue color rectangle. This indicates possible bearishness.
Weekly Chart – CCMP
#7 Bearish Candlestick pattern: There is a bearish candlestick pattern of the dark-cloud-cover pattern being formed in the weekly chart. This is marked as an orange color ellipse. A dark-cloud-cover pattern is a bearish reversal pattern where a down candle opens above the close of the previous week’s up candle and then closes below the midpoint of the up candle. The formation of this pattern is a possible bearish sign.
#8 Bearish RSI: The weekly chart shows that the RSI has been forming lower lows and lower highs, indicating overall bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for CCMP is below the price of $149.
TP: Our target prices are $140 and $130 in the next 3-6 months.
SL: To limit risk, place a stop loss at $155. Note that this stop loss is on a closing basis.
Our target potential downside is 6% to 13% in the next 4-6 months.
For a risk of $6.00, our target rewards are $9.00 and $19.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the resistance area with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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