The leading supplier and fabless semiconductor manufacturer headquartered in Tainan City, Taiwan, Himax Technologies, Inc. (NASDAQ: HIMX) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Flag Pattern Breakout: As seen from the daily 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. This is a possible sign of an upcoming bullish move.
Daily Chart – HIMX
#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 (+DI) is greater than (-DI), and ADX has started to rise from below both (+DI) and (-DI). These point to a possible upmove in the near-term.
#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 Consolidation Area: The weekly chart shows that the stock was trading within a consolidation area for the past several days. This is marked in the chart as a purple color rectangle. Currently, the stock looks ready for a breakout from this consolidation area. Once a stock breaks out from a consolidation area, it usually moves higher.
Weekly Chart – HIMX
#7 Bullish Stoch: The %K line (blue color) of the stochastic is currently above the %D line (orange color) in the weekly chart, indicating possible bullishness.
#8 Bullish ADX and DI: The weekly chart also shows that the ADX line has moved higher from below the –DI and +DI lines. The +DI line and the ADX line are also currently above –DI line. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for HIMX is above the price of $16.20. This is marked as a green color dotted line in the charts above.
TP: Our target prices are $22 and $26 in the next 1-5 months.
SL: To limit risk, place a stop loss at $13.00. Note that this stop loss is on a closing basis.
Our target potential upside is almost 36% to 61% in the next 3-6 months.
For a risk of $3.20, our target rewards are $5.80 and $9.80. This is almost 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 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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