The technology company focusing on depolymerizing waste polyethylene terephthalate (PET) plastics and polyester fibers into base building blocks and polymerizes monomers into virgin-quality PET plastic for use in food-grade plastic packaging, Loop Industries Inc. (NASDAQ: LOOP) seems to be gearing up for a surge as per its latest charts. This stock was also a part of our watchlist recently.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock has broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – LOOP
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-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) which is typically considered bullish.
#4 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line, as well as 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 Consolidation Area: The weekly chart shows that the stock was trading within a range for the past several months. This indicates consolidation. The consolidation area is marked as a pink color rectangle in the chart. Currently, the stock looks poised for a breakout from this consolidation area. A breakout from a consolidation area generally indicates bullishness.
Weekly Chart – LOOP
#7 MACD Above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is also a possible bullish sign.
#8 Price Above MAs: In the weekly chart as well, the stock is currently trading above both its 50-week and 200-week SMA, which implies that the bulls are currently in control.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of LOOP is above the breakout level of the consolidation area, which translates to a price of around $17.70.
TP: Our target prices are $21 and $25 in the next 4 to 6 months.
SL: To limit risk, place a stop loss below $15.50. Note that this stop loss is on a closing basis.
Our target potential upside is 19% to 41% in the next 3-5 months.
For a risk of $2.20, the target rewards are $3.30 and $7.30. This is a nearly 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 ascending triangle 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 its sector.
Happy Trading!
— Tara
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