The leading provider of laser and energy-based aesthetic systems for practitioners worldwide, Cutera, Inc. (NASDAQ: CUTR) seems to be ready for a price surge in the near-term.
Bullish Indications
#1 Downtrend Channel: The daily chart shows that the stock was trading within a downtrend channel for the past few months. This channel is marked on the daily chart in purple color lines. The stock had taken support at the bottom of the channel multiple times before moving higher. Once the stock breaks out of this channel, it may move higher.
Daily Chart – CUTR
#2Above MA: The stock is currently trading above its 50-day SMA, indicating that the bulls are currently in control.
#3 CCI moving up: The CCI indicator value has currently started to move higher after reaching oversold levels.
This indicates possible bullishness.
#4 Bullish RSI: Relative strength index (RSI) is currently nearing 50 after moving up from oversold levels in the daily chart.
This indicates the strength of the current upmove.
#5 Uptrend Channel: The daily chart shows that the stock has formed a small uptrend channel within the downtrend channel. This uptrend channel is marked in orange color lines. A breakout from this uptrend channel would signify possible bullishness.
#6 RSI-Price bullish divergence: The weekly chart shows that there is a bullish divergence between RSI and price. While the price formed a lower low, the RSI formed to a higher low. This is marked as orange color dotted lines in the chart. A bullish divergence is usually the sign of a possible upmove in the near-term. The stock is also moving higher from a strong support area, which is marked as a blue color dotted line. All these are possible bullish indications.
Weekly Chart – CUTR
#7 Oversold RSI: The RSI is near oversold levels in the weekly chart, which indicates that the stock may reverse soon to move higher.
#8 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#9 MACD above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can the shares of CUTR if it crosses above the resistance level of $16.40.
TP: Our target prices are $20 and $25 in the next 3-6 months.
SL: To limit risk, place a stop loss at $14.00. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 22% to 52% in the next 3-6 months.
For a risk of $2.40, our first target reward is $3.60 and the second target reward is $8.60. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the trend channels. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any new government rules or regulatory changes in its sector.
Happy Trading!
Tara
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