PagSeguro Digital Ltd (NYSE: PAGS) seems to be poised for a price surge as per its latest charts. The company provides financial technology solutions and services for consumers, individual entrepreneurs, micro-merchants, and small and medium-sized companies in Brazil and internationally.
#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 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.
#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 Bullish RSI: The daily chart shows that the RSI is above 50 and moving higher, which is a positive indication.
#6 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a purple color dotted line. This looks like a good area for the stock to move higher.
#7 %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.
#8 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#9 Bullish Engulfing Pattern: The weekly chart shows that the stock has formed a bullish engulfing candlestick pattern. This is marked as an orange color ellipse. The bullish engulfing pattern is a two-candle reversal pattern. The first bar of the bullish engulfing pattern is bearish and is followed by a bullish candle, which body completely engulfs the first bearish candle.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PAGS above the price of around $17.30.
TP: Our target prices are $20 and $24 in the next 3-6 months.
SL: To limit risk, place stop-loss at $15.80. Note that the stop-loss is on a closing basis.
Our target potential upside is 16% to 39% in the next 3 to 6 months.
For a risk of $1.50, our target rewards are $2.70 and $6.70. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the breakout level of the falling wedge pattern 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.
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