Samsara Inc. (NYSE: IOT) seems to be poised for a price surge as per its latest charts. The company provides solutions that connect physical operations data to its Connected Operations Cloud.
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few weeks. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in 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 the –DI and +DI lines. This indicates possible bullishness.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates 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 50-week SMA. All these are possible bullish indications.
#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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of IOT above the price of around $31.10.
TP: Our target prices are $35 and $37 in the next 3-6 months.
SL: To limit risk, place stop-loss at $29.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 13% to 19% in the next 3 to 6 months.
For a risk of $2.10, our target rewards are $3.90 and $5.90. 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 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.
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