The company that operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount in North America and internationally, and provides deals in various categories, Groupon Inc. (NASDAQ: GRPN) seems poised for a price surge according to its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As seen in the daily chart, a symmetrical triangle pattern was formed during the past few weeks.
This pattern is shown in pink color lines and represents a period of consolidation before the price breaks out.A symmetrical triangle pattern is typically formed when there is an indecision in the price movements and uncertainty among the buyers and sellers.
Once a breakout from the upper trend line of the pattern occurs, it usually signifies the start of a new bullish trend.
Currently, the stock has broken out of the symmetrical triangle pattern with very high volume, indicating bullishness.
Daily Chart – GRPN
#2 Above MA: The stock price is currently above its short-term moving average of 50-day SMA. This is a possible bullish sign.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started to rise higher from below (+DI) and (-DI).
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color), indicating bullishness.
#5 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#6 Double Bottom Pattern: The weekly chart shows that the stock is currently forming a double bottom pattern. This is marked in orange color. A double bottom pattern is a bullish reversal pattern and a breakout from it would indicate that the stock could possibly move upwards.
Weekly Chart – GRPN
#7 Bullish Stoch: In the weekly chart as well, the %K line of the stochastic indicator has crossed above the %D line. The indicator is also moving higher from oversold levels. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of GRPN if it trades above yesterday’s close, at a price of around $26.50.
TP: Our target prices are $35 and $42 in the next 4-6 months.
SL: To limit risk, place a stop loss at $21. Note that this stop loss is on a closing basis.
Our target potential upside is 32% to 59% in the next 4-6 months.
For a risk of $5.50, our target rewards are $8.50 and $15.50. 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 with high volume from the symmetrical triangle pattern. 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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