The American software development company that develops, manufactures, licenses, sells, and supports computer software and services for the design, construction, and operation of infrastructure, Bentley Systems Inc. (NASDAQ: BSY) seems to be ready for a surge as per its latest charts. This stock was also a part of our recent watchlist for possible breakout stocks.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the daily chart in purple color. A breakout from an ascending triangle pattern is a possible bullish indication.
Daily Chart – BSY
#2 Trading Above MA: The stock is currently trading above its short-term moving average of 50-day SMA, which implies that the bulls are currently in control.
#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 are also currently above –DI line. This indicates possible bullishness.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#6 Breakout from Consolidation Area: The weekly chart shows that the stock was trading within a range for the past several weeks. This indicates consolidation. The consolidation area is marked as a green color rectangle in the chart. A breakout from this consolidation area generally indicates bullishness.
Weekly Chart – BSY
#7 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD signal line, which indicates possible bullishness.
#8 Bullish ADX: In the weekly chart as well, the ADX line has moved up from below the –DI and +DI lines. The +DI line and the ADX line are also currently above –DI line. This is a bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for BSY is above yesterday’s close, at around $57.00. Alternatively, you can purchase the shares of BSY if it corrects to the breakout level of the ascending triangle pattern, at around $54.00.
TP: Our target prices are $60 and $65 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $55.00 (for entry near $57.00) and $50.50 (for entry near $54.00). Note that this stop loss is on a closing basis.
Our target potential upside is 5% to 20% in the next 3-5 months.
Entry near $57.00: For a risk of $2.00, the target rewards are $3.00 and $8.00. This is a nearly 1:2 and 1:4 risk-reward trade.
Entry near $54.00: For a risk of $3.50, the target rewards are $6.00 and $11.00. This is a nearly 1:2 and 1:3 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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