Lemonade Inc. (NYSE: LMND) seems to be poised for a price surge as per its latest charts. The company offers renters’ insurance, homeowners’ insurance, car insurance, pet insurance and term life insurance in the United States.
Bullish Indications
#1 Consolidation area: The daily chart shows that the stock was consolidating within a price range for the past few days. This area is marked as an orange color rectangle. The stock now looks ready for a breakout from this consolidation area. Once the stock breaks out of a consolidation area, it could move higher.
LMND – Daily Chart
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA, indicating that the bulls are gaining control. This is a positive indication.
#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: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#5 Falling Wedge Pattern Breakout: As you can see from the weekly chart, the stock was forming a falling wedge pattern for the past few weeks. These are marked as pink 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.
LMND – 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 has also moved higher from oversold levels. This is a possible bullish indication.
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently nearing 50 and moving higher. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of LMND above the price of around $25.65.
TP: Our target prices are $30.00 and $33.00 in the next 3-6 months.
SL: To limit risk, place stop-loss at $24.80. Note that the stop-loss is on a closing basis.
Our target potential upside is 13% to 24% in the next 3 to 6 months.
For a risk of $1.85, our target rewards are $3.35 and $6.35. 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 from the consolidation area with a 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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