The company that operates a digital consumer finance platform under the 360 Jietiao brand in the People’s Republic of China, whose platform provides online consumer finance products to the borrowers funded by institutional funding partners, and provides incremental credit assessment, collection, and other services, as well as guarantee for defaulted loans, 360 DigiTech Inc. (NASDAQ: QFIN) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Consolidation Area Breakout: The daily chart shows that the stock was trading within a consolidation area for the past several days. This is marked in the daily chart as a purple color rectangle. Currently, the stock has broken out of this consolidation area with a high volume. Once a stock breaks out from a consolidation area, it usually moves higher.
Daily Chart – QFIN
#2 Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA and had moved higher with high volume. This indicates an overall bullishness of the stock.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because the +DI line and the ADX line are above the -DI line and the ADX line is currently moving higher from below the +DI and -DI lines.
#4 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
#5 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). This indicates a possible bullish bias.
#6 Flag Pattern Breakout: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic flag pattern and is marked in the chart in pink color. A flag is a continuation pattern. Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern and is trading above a resistance area, which is marked as a blue color dotted line. This is a possible sign of an upcoming bullish move.
Weekly Chart – QFIN
#7 Bullish Stoch: The %K line (blue color) of the stochastic is currently above the %D line (orange color), indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for QFIN is above the price of around $36.80.
TP: Our target prices are $41 and $46 in the next 1-5 months.
SL: To limit risk, place a stop loss at $34.20. Note that this stop loss is on a closing basis.
Our target potential upside is almost 11% to 25% in the next 1-5 months.
For a risk of $2.60, our target rewards are $4.20 and $9.20. This is almost 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 flag pattern 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.
Happy Trading!
Tara
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