The Nashville, Tennessee-based teledentistry company, SmileDirectClub Inc. (NASDAQ: SDC) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As you can see from the daily chart, the stock had recently formed a symmetrical triangle pattern. This pattern is shown as pink color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, indicating possible bullishness.
#2 Trading Above MAs: The stock is currently trading above its short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, which implies that the bulls are currently in control.
#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 Stoch: The %K line (blue color) is above the %D line (orange color) of the stochastic in the daily chart, indicating possible bullishness.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines in the daily chart. The +DI line is also currently above –DI line. All these indicate possible bullishness.
#6 Broken Downtrend: The weekly chart shows that the stock has currently broken out of a downtrend. This downtrend line is marked as a purple color line. This is a possible bullish indication.
#7 Bullish ADX and DI: The +DI line is currently above the -DI line in the weekly chart, which is a possible bullish indication.
#8 Bullish Stoch: The %K line of the stochastic has crossed above the %D line and is moving up from oversold levels in the weekly chart. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of SDC if it trades above the price of around $11.40.
TP: Our target prices are $15 and $20 in the next 4-6 months.
SL: To limit risk, place a stop loss at $9.00. Note that this stop loss is on a closing basis.
Our target potential upside is almost 32% to 75% in the next 4-6 months.
For a risk of $2.40, our target rewards are $3.60 and $8.60. This is an almost 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 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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