The developer and manufacturer of organic light emitting diodes technologies and materials as well as the provider of services to the display and lighting industries, Universal Display Corporation (NASDAQ: OLED) seems to be poised for a decline in its price in the near term as per its latest charts.
#1 Bearish Flag Pattern: The daily chart shows that the stock has been forming a bearish flag pattern during the past several weeks. This is marked in purple color lines. A breakdown from a flag pattern usually indicates bearishness.
#2 Bearish MACD: The MACD line is currently below the MACD signal line in the daily chart, which is a possible bearish indication.
#4 RSI moving down: The daily chart shows that the RSI has moved down from overbought levels and is currently moving lower.
This is a possible bearish sign.
#5 Fibonacci Resistance: Usually, after a down-move, stocks retrace to any of the key Fibonacci levels before resuming its downward trend.
The stock had moved down after facing resistance at the 50% Fibonacci level and is currently near the 38.2% Fibonacci resistance level as seen in the weekly chart. This seems like a good area for the stock to decline further.
#6 Symmetrical Triangle Pattern: The weekly chart shows that the stock has been forming a symmetrical triangle pattern during the past few weeks. This is marked in orange color in the chart. The stock currently looks ready for a break down from the symmetrical triangle pattern. Once a breakdown occurs, usually the stock would move lower in the near-term.
#7 Bearish ADX and DI: The ADX and DI indicate bearishness as per the weekly chart. This is because (+DI) < (-DI); ADX and (-DI) are above (+DI); and ADX is moving down from above both (+DI) and (-DI). All these points to possible bearishness.
#8 Bearish RSI: The weekly chart shows that the RSI has been moving down from overbought levels. It is currently below 50. This is a possible bearish indication.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on OLED below the price of around $148.
TP: Our target prices are $135 and $120 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 9% to 19% in the next 3-6 months.
For a risk of $7.00, our target rewards are $13.00 and $28.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the symmetrical triangle pattern 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.
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