Unity Software Inc. (NYSE: U) shows signs of further upmove according to its latest charts. Unity Software Inc., formerly known as Over the Edge Entertainment, is an American video game software development company based in San Francisco.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As seen in the daily chart, the stock recently broke out of a symmetrical triangle pattern. This pattern is shown as purple lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend.
Daily Chart – U
#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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness as the ADX line has started to move up from below –DI and +DI lines. The +DI line is also currently above the –DI line, indicating possible bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 23.6% Fibonacci support level of the upmove before moving higher, as seen in the weekly chart. This is a possible bullish sign.
Weekly Chart – U
#7 Broken Downtrend: The stock has currently broken out of a short-term downtrend and has now started moving higher. The downtrend line has been marked in blue color in the weekly chart.
#8 MACD above Signal Line: The MACD line (blue color) is currently above the signal line (orange color) in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of U above yesterday’s high. This translates to a price of around $121.50.
TP: Our target prices are $130 and $140 in the next 4-6 months.
SL: To limit risk, place a stop loss at $116.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 7% to 15% in the next 4-6 months.
For a risk of $5.00, our target rewards are $8.50 and $18.50. This is an 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 symmetrical 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 the sector.
Happy Trading!
— Tara
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