The American specialty retailer of children’s apparel and accessories that markets apparel under the Children’s Place, Place, Baby Place, and Gymboree brand names, Children’s Place Inc. (NASDAQ: PLCE) seems to be getting ready for a price bump according to the charts.
Bullish Move – Chart Indications
#1 Channel: As you can see from the daily chart of PLCE, the stock is trading within a channel for the past several days and had typically taken support at the lower channel before bouncing back. The stock is currently moving downwards towards the lower channel after a previous bullish move to the upper channel, indicating that it is getting ready for its next big move. This is a bullish sign.
Daily Chart – PLCE
#2 Unusually high volume, small candle: The daily chart shows that the latest candle was formed with an unusually high volume. However, the candle formed was a small bearish candle despite the high volume. This indicates that along with the sellers, buyers are also coming in at this price range and is becoming a demand area. This is a possible bullish indication.
#3 Oversold RSI: Presently, the RSI reading for the stock is near 28.
This indicates that the stock is oversold and a reversal of the downtrend may be quite imminent.
#4 Support Level: The stock’s daily chart shows that the price is currently above a long-term support area, which is marked as an orange color dotted line. This is a possible bullish indication.
#5 Oversold RSI: In the weekly chart as well, the RSI is currently near oversold levels and looks ready for a trend reversal soon.
Weekly Chart – PLCE
#6 Bollinger Band Support: The weekly chart shows that the stock is currently trading near the lower band of the Bollinger Band. At the same time, RSI is above 30 and starting to move up. This is usually a typical bullish setup based on the RSI-Bollinger band.
#7 Oversold CCI: The CCI is currently near oversold levels in the weekly chart. This is also a bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of PLCE if it closes above yesterday’s close. This translates to a price of around $19.
TP: Our target prices are $25 and $30 in the next 3-6 months.
SL: To limit risk, place a stop loss below $16.00. Note that the stop loss is on a closing basis.
Our target potential upside is nearly 32% to 58% in the next 3-6 months.
For a risk of $3.00, our target rewards are $6.00 and $11.00. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers almost 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the current channel and goes below the long-term support level. 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 the sector.
Happy trading!
— Tara
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