The cloud-based professional employer organization that administers payroll and health benefits and advises clients on employment law compliance and risk reduction, acting in some cases as an outsourced human resources department, TriNet Group Inc. (NYSE: TNET) 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 TNET 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 lines in the daily chart. Once a stock breaks down from a rising wedge pattern, it typically moves lower in the near-term.
Daily Chart – TNET
#2 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#3 %K below %D in Stochastic: The %K line (blue color) is currently below the %D (orange color) line in stochastic of the daily chart. This indicates possible bearishness.
#4 Supply Area: The weekly chart shows that the stock is currently near a supply area, as it was not able to cross above the resistance level even after multiple attempts.
This area is marked as an orange color ellipse. This indicates possible bearishness.
Weekly Chart – TNET
#5 Bearish Stochastic: The stochastic in the weekly chart is near overbought levels and moving down. The %K line (blue color) has also crossed below the %D (orange color) line. All these indicate possible bearishness.
#6 Bearish RSI: The weekly chart shows that the Relative Strength Index is moving down from overbought levels. This indicates an overall bearishness.
#7 Resistance level: There is a strong resistance level closeby for the stock. This is marked as a pink color dotted line.
The stock had bounced lower on reaching this level. This is a possible bearish indication.
#8 Bearish CCI: The weekly chart shows that CCI is currently moving down after reaching overbought levels, indicating possible bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on TNET below the price of around $64.50.
TP: Our target prices are $60 and $55 in the next 3-6 months.
SL: To limit risk, place a stop loss at $67.60. Note that this stop loss is on a closing basis.
Our target potential downside is 7% to 15% in the next 3-6 months.
For a risk of $3.10, our target rewards are $4.50 and $9.50. 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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