The California-based surgical and medical instrument manufacturing company, Pro-Dex Inc. (NASDAQ: PDEX) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock had recently formed an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the daily chart in purple color. Currently, the stock has broken out of the ascending triangle pattern, indicating possible bullishness.
Daily Chart – PDEX
#2 Trading Above MAs: The stock is currently trading above both its short-term moving average of 50-day and the long-term moving average of 200-day SMA, which implies that the bulls are currently in control. This is a possible bullish sign.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color).
This is typically considered a bullish signal.
#4 Bullish ADX: The ADX line has currently moved up from below –DI and +DI lines.
The +DI line and the ADX line is also currently above –DI line.
This indicates possible bullishness.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Unbroken Uptrend: The weekly chart shows that the stock’s uptrend is currently unbroken, as it has been forming higher highs and higher lows. The trend line is marked in pink color in the weekly chart below. The stock is also trading above its 50-week as well as 200-week SMA. All these are possible bullish signs.
Weekly Chart – PDEX
#7 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD signal line, which 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 PDEX is in two scenarios.
- If the stock corrects to the support level of the ascending triangle breakout, at around $22.
- If the stock trades above Friday’s high at around $25.10.
TP: Our target prices are $29 and $35 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $18.00 (for entry near $22.00) and $22.40 (for entry near $25.00). Note that this stop loss is on a closing basis.
Our target potential upside is 16% to 29% in the next 3-5 months.
- Entry at $22.00: For a risk of $4.00, the target rewards are $7.00 and $13.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at $25.00: For a risk of $2.60, the target rewards are $4.00 and $10.00. This is a nearly 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 with high volume from the ascending triangle 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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