Today we’ll walk you through a trade idea with Support.com, Inc. (NASDAQ: SPRT) that could deliver up to 58% returns in the next 3-6 months.
Support.com, Inc. is a technical support company for businesses and consumers. The company’s services are performed on Windows, macOS, iOS, and Android, supporting connected and smart devices. SPRT is headquartered in Wilmington, Delaware with an administrative office in Sunnyvale, California.
SPRT Insider Transactions
SPRT is not presently covered by analysts. However, according to TipRanks, Corporate Insiders had bought shares worth $23.1K in the last 3 months.
SPRT – Insider Transactions
Why SPRT is trending?
The shares of Support.com, Inc. had started taking off after announcing plans to join forces with Greenidge Generation Holdings, a bitcoin mining company.
Upon completion, the tie-up would create a company focused on bitcoin mining operations. Support.com will become a wholly-owned subsidiary of Greenidge, and the merger is expected to close in the third quarter of this year. It may be noted that Greenidge is positioning itself as a planet-friendly alternative, as it bills itself as “the first 100% carbon-neutral Bitcoin transaction processor in the United States.”
There had been other tailwinds for the stock. The stock had closed 38% higher on Monday, on retail interest and short squeezes.
SPRT was touted as a potential short squeeze candidate by traders across social media platforms, resulting in the current surge. Wall Street was betting heavily against Support.com, with more than 67% of its float sold short as of Aug. 13, according to Yahoo! Finance. That amounts to more than 25% of the company’s outstanding share count, making it the ideal candidate for a short squeeze. The surging share price and the resulting short covering drove the shares even higher.
However, despite the high short interest and the fervor surrounding cryptocurrency, Support.com has clear headwinds as well. The company had reported its second quarter results on Aug. 13. The revenue had decreased 23% compared to the same quarter last year, while the net loss was 3 cents per share for the quarter.
Here’s how to trade SPRT now.
SPRT Chart
On analysis, the hourly chart of SPRT shows that there are multiple bullish indications for the stock.
SPRT – Hourly Chart
#1 Trendline support: The hourly chart shows that the stock has currently taken support near the short-term uptrend line, which is marked in purple color. This seems like a good area for the stock to bounce higher.
#2 Bullish RSI: The hourly chart shows that the RSI is currently above 50 and moving higher, indicating possible bullishness.
#3 Price Above MAs: The stock is trading above its 50-day as well as 200-day SMA, indicating that the bulls are presently in control.
#4 Bullish ADX and DI: The ADX line has currently moved up from below –DI and +DI lines. The +DI line and the ADX lines are also currently above the –DI line. This indicates possible bullishness.
However, there are also multiple bearish indications for the stock, like bearish Aroon, bearish MACD, and bearish stochastic.
Below is the bullish and bearish play for SPRT.
Recommended Bullish Trade (based on the chart)
Buy Levels: If you want to get in on this trade, you can purchase the shares of SPRT in the following scenarios.
- Buy Level #1: The first buy level for SPRT is above the price of around $38.00
- Buy Level #2: The second buy level for the stock is above the price of $50.00.
Important Note: Make sure that you only enter the trade once the daily close is above the recommended price level.
TP: Our target prices for various buy levels are as follows
- The target prices for Buy Level #1 ($38.00) are $50 and $60 in the next 3 to 6 months.
- The target prices for Buy Level #2 ($50.00) are $60 and $70 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at the following levels.
- The stop loss for Buy Level #1 ($38.00) is $30.50.
- The stop loss for Buy Level #2 ($50.00) is $44.30.
Note that the stop loss is on a closing basis.
Target Upside: Our target potential upside is 20% to 58% in the next 3-6 months.
- Entry at Buy Level #1 ($38.00): For a risk of $7.50, our first target reward is $12.00 and the second target reward is $22.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at Buy Level #2 ($50.00): For a risk of $5.70, our first target reward is $10.00 and the second target reward is $20.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Risks to Consider: The stock may reverse its overall trend if it breaks down from the various support levels with high volume. 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.
Recommended Bearish Trade (based on the chart)
In case the stock breaks down from the near-term support area, it would point to an upcoming short-term correction. In that case, below are the entry level, stop loss level, and target prices.
Sell Level: You can take short positions on SPRT below the price of around $26.00. This sell level is marked as a red color dotted line in the chart.
Important Note: Make sure that you only enter the trade once the daily close is below the recommended price level.
TP: Our target prices are $20 and $17 in the next 3-6 months.
SL: To limit risk, place a stop loss at $29.40. Note that this stop loss is on a closing basis.
Our target potential downside is 23% to 35% in the next 3-6 months.
For a risk of $3.40, our first target reward is $6.00 and the second target reward is $9.00. This is a nearly 1:2 and 1:3 risk-reward trade
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider: The stock may reverse its overall trend if it breaks upwards with high volume. The breakout of the stock could be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
— Trades of the Day Research Team
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