The American company that has announced a number of concept zero emissions vehicles since 2016, with plans to produce some of them in the future, Nikola Corporation (NASDAQ: NKLA) seems to be poised for a price surge as per its latest charts.
#1 Channel Breakout: The stock’s daily chart shows that it has recently broken out of a trend channel. This channel is marked on the daily chart in pink color. A breakout from a downtrend channel is a possible bullish sign.
#2 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
This indicates that the bulls have currently gained control of the stock.
#4 Bullish Stochastic: The stochastic shows that the %K (blue color) line is above the %D (orange color) line. This indicates possible bullishness.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line is also currently above the –DI line. This indicates possible bullishness.
#6 Breakout from Pennant Pattern: In the weekly chart, the stock was in an uptrend after which it was in a consolidation phase with a narrowing range. This is a classic pennant pattern, which is marked as purple color lines in the weekly chart. Currently, the stock has broken out of the pennant pattern and is continuing its uptrend. The breakout from a continuation pattern like the pennant pattern indicates that the stock may move higher.
#7 Bullish RSI: In the weekly chart, RSI is moving up from oversold levels and is currently above 50. This is a bullish sign.
#8 Bullish ADX and DI: In the weekly chart as well, the ADX line has moved up from below –DI and +DI lines. The +DI line and the ADX line is also currently above the –DI line. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for NKLA is above yesterday’s close. This translates to a price of around $50.10.
TP: Our target prices are $60 and $70 in the next 3-6 months.
SL: To limit risk, place a stop loss at $44.00. Note that the stop loss is on a closing basis.
Our target potential upside is almost 20% to 40% in the next 3-6 months.
For a risk of $6.10, our target rewards are $9.90 and $19.90. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the channel breakout 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.
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