The American online e-commerce platform that facilitates transactions between sellers and buyers, ContextLogic Inc. (NASDAQ: WISH) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart shows that the stock was trading within a falling wedge pattern during the past several days. This is marked in the daily chart in pink color. Currently, the stock has broken out of this falling wedge pattern. A breakout from a bullish pattern like Falling Wedge Pattern shows that the stock has gained momentum and has the potential to move further up.
Daily Chart – WISH
#2 Bullish Stochastic: The %K line has currently crossed above the %D line of the stochastic, indicating bullishness.
#3 Bullish ADX and DI: The ADX indicator shows bullishness, as the (+DI) line is currently above the (-DI) line and the ADX line has currently moved higher from below the (+DI) and (-DI) lines.
#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 inside bar pattern: The weekly chart shows that the stock has formed a bullish inside bar candlestick pattern. This is marked as a purple color ellipse in the weekly chart. An “inside bar” pattern is a two-candlestick price action trading strategy in which the inside candlestick is smaller and within the high to low range of the previous candlestick, i.e. the high is lower than the previous candle’s high, and the low is higher than the previous candle’s low. An inside bar points to an upcoming reversal in the market. This was further confirmed by the high-volume candle this week. This is a strong bullish indication.
Weekly Chart – WISH
#6 Oversold RSI: The RSI is currently moving higher in the weekly chart, after reaching oversold levels. This is a positive indication.
#7 Bullish Stoch: In the weekly chart as well, the %K line of the stochastic is above the %D line, 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 WISH is above the 50-day moving average. This translates to a price of around $12.00. This is marked as a green color dotted line in the charts above.
TP: Our target prices are $15 and $18 in the next 3 to 5 months based on the falling wedge pattern breakout.
SL: To limit risk, place a stop loss below $10.40. Note that this stop loss is on a closing basis.
Our target potential upside is almost 25% to 50% in the next 3-5 months.
For a risk of $1.60, our first target reward is $3.00 and the second target reward is $6.00. 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 falling wedge 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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