The Detroit-based holding company consisting of personal finance and consumer service brands including Rocket Mortgage, Rocket Homes, Rocket Loans, Rocket Auto, Rock Central, Amrock, Core Digital Media, Rock Connections, Lendesk and Edison Financial, Rocket Companies Inc. (NYSE: RKT) seems poised for a price surge according to its latest charts. This stock was also a part of our watchlist for this week.
Bullish Indications
#1 Downtrend Broken: The daily chart shows that the stock has currently broken out of a short-term downtrend (marked as a purple color line). This is a bullish sign.
Daily Chart – RKT
#2 Above MA: The stock is currently trading above its 50-day SMA. This is a possible bullish sign.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is rising higher from below both (+DI) and (-DI).
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#5 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the daily chart. This usually indicates bullishness.
#6 Breakout from consolidation area: The weekly chart shows that the stock was trading within a range for the past several days. This indicates consolidation. The consolidation area is marked as a pink color rectangle in the chart. Currently, the stock has broken out of this consolidation area. A breakout from this consolidation area generally indicates bullishness.
Weekly Chart – RKT
#7 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the weekly chart as well. This usually indicates bullishness.
#8 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is currently above both (+DI) and (-DI).
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for RKT is above the resistance level of $25.90. However, you can purchase half the intended quantity of shares of RKT above yesterday’s close, at around $24.40.
T: Our target prices are $28 and $32 in the next 4-6 months.
SL: To limit risk, place a stop loss at $22.10 (for entry near $24.40) and $24.50 (for entry near $25.90). Note that this stop loss is on a closing basis.
Our target potential upside is 8% to 31% in the next 4-6 months.
- Entry near $24.40: For a risk of $2.30, our target rewards are $3.60 and $7.60. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $25.90: For a risk of $1.40, our target rewards are $2.10 and $6.10. 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 breakout level of the consolidation area. 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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