DexCom, Inc. (NASDAQ: DXCM) seems to be poised for a price surge as per its latest charts. The company develops, manufactures, produces, and distributes continuous glucose monitoring systems for diabetes management.
The stock was also a part of our recent watchlist for breakout stocks.
Bullish Indications
#1 Channel Breakout: As you can see from the weekly chart, the stock was trading within a downtrend channel during the past few months. This is marked in the chart in purple color. Currently, the stock has broken out of the downtrend channel and is moving higher. A breakout from the channel usually indicates that the stock would move higher.
DXCM – 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 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Flag Pattern Breakout: The weekly chart shows that the stock was in an uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart in pink color. Currently, the stock has broken out of the flag. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). The stock is also trading above its 200-week SMA. All these are possible bullish indications.
DXCM – Weekly Chart
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of DXCM above the price of around $95.40.
TP: Our target prices are $103 and $111 in the next 3-6 months.
SL: To limit risk, place stop-loss at $91.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 8% to 16% in the next 3 to 6 months.
For a risk of $4.40, our target rewards are $7.60 and $15.60. This is a nearly 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 from the trend channel 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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