The American multilevel marketing company that develops and sells personal care products and dietary supplements under its Nu Skin and Pharmanex brands, Nu Skin Enterprises, Inc. (NYSE: NUS) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 IH&S Breakout: As you can see from the daily chart, the stock has recently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
Daily Chart – NUS
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently gaining control.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a bullish bias.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line 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) are above (-DI), and ADX has started to rise from below the (+DI) and (-DI) lines.
#6 Broken Downtrend: The weekly chart shows that the stock has broken out of a short-term downtrend, which is marked as a purple color line. This is a possible bullish indication.
Weekly Chart – NUS
#7 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line, which is a bullish signal.
#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, the ideal buy level for NUS is if the stock corrects to a price of around $40.00. However, you can purchase half the intended quantity of shares of NUS if it trades above $49.00.
TP: Our target prices are $55 and $60 based on the breakout from the IH&S pattern.
SL: To limit risk, place a stop loss at $35.20 (for entry near $40) and $45 (for entry near $49.00). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 12% to 50% in the next 4-6 months.
- Entry near $40: For a risk of $4.80, the target rewards are $15.00 and $20.00. It is a nearly 1:3 and 1:4 risk-reward trade.
- Entry near $49: For a risk of $4.00, the target rewards are $6.00 and $11.00. It is a nearly 1:2 and 1:3 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 with high volume from the IH&S 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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