The American business and financial software company that develops and sells financial, accounting, and tax preparation software and related services for small businesses, accountants, and individuals, Intuit Inc. (NASDAQ: INTU) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Rising Wedge Pattern Breakdown: The daily chart shows that INTU has recently broken down from a rising wedge pattern that was formed during the past few months. This is a bearish pattern and is marked in pink color in the daily chart. Once a stock breaks down from a rising wedge pattern, it typically moves lower in the near-term.
Daily Chart – INTU
#2 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#3 Bearish Stochastic: The stochastic in the daily chart is currently moving down. The %K line is also below the %D line. All these indicate possible bearishness.
#4 Price below MA: The stock is currently trading below the 50-day SMA, which indicates that the bears are currently gaining control.
#5 Bearish ADX and DI: The ADX and DI indicate bearishness as per the daily chart. This is because (-DI) is currently above (+DI) and ADX is below both (+DI) and (-DI) and moving higher. All these points to possible bearishness.
#6 Selling pressure: The weekly chart shows that after forming a doji candle last week, the stock was not able to cross above that level. The latest candle being formed is a long red candle, indicating confirmation of an upcoming bearish move. These candles are marked in a pink color ellipse. This is a possible bearish sign.
Weekly Chart – INTU
#7 Double Top Pattern: The weekly chart shows that the stock is currently forming a double top pattern. It is a bearish pattern and is marked in purple color in the chart. Once the stock breaks down from the double top pattern, it may move lower.
#8 Bearish RSI: The RSI is near 50 and moving lower in the weekly chart, indicating possible bearishness.
#9 Bearish Stochastic: The stochastic in the weekly chart is near overbought levels and moving down. The %K line has also crossed below the %D line. All these indicate possible bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for INTU is below $280.
TP: Our target prices are $270 and $260 in the next 3-6 months.
SL: To limit risk, place a stop loss at $286.80. Note that this stop loss is on a closing basis.
Our target potential downside is 4% to 7% in the next 3-6 months.
For a risk of $6.80, our target rewards are $10.00 and $20.00. 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 rising wedge 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.
Happy Trading!
— Tara
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