Sprout Social Inc. (NASDAQ: SPT) seems to be getting ready for a price bump as per the latest charts. Sprout Social, Inc. designs, develops, and operates a web-based social media management tool in the Americas, EMEA, and the Asia Pacific. The company offers cloud software that brings together social messaging, data, and workflows in a unified system of record, intelligence, and action.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern for the past few weeks. These are marked as purple color lines. The stock has currently broken out of the falling wedge pattern and looks poised for an upmove. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
SPT – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line is greater than the (-DI) line and the ADX line is starting to move higher from below (-DI) and (+DI) lines.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
#4 Bullish Stoch: The %K (blue) line of stochastic is currently above the %D (Orange) line in the daily chart, indicating possible bullishness.
#5 Fibonacci Support: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 23.6% Fibonacci support level before moving higher, as seen in the weekly chart. This indicates bullishness.
SPT – Weekly Chart
#6 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart, and is also moving higher from oversold levels. This is a possible bullish indication.
#7 Bullish RSI: In the weekly chart, the RSI is currently moving higher from oversold levels. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy price for SPT is above the price of $73.00.
TP: Our target prices are $82 and $93 in the next 4-6 months.
SL: To limit risk, place a stop loss below $68. Note that the stop loss is on a closing basis.
Our target potential upside is 12% to 27% in the next 4-6 months.
For a risk of $5.00, our first target reward is $9.00 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 falling wedge pattern 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.
Happy Trading!
— Tara
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