The Semiconductor Test and Inspection Equipment and PCB Test Equipment company, Cohu, Inc. (NASDAQ: COHU) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color lines. A breakout from this pattern typically indicates bullishness. The base of the triangle generally acts as a good support level after the breakout.
Daily Chart – COHU
#2 Trading above MAs: The price is currently above its short-term moving average of 50-day SMA as well as the longer-time moving average of 200-day SMA. This implies a possible bullish bias for the stock.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
#4 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line and the ADX line is also currently above the –DI line. This indicates possible bullishness.
#5 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating possible bullishness.
#6 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern which is a possible bullish sign. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as pink color lines.
Weekly Chart – COHU
#7 Above Support Area: The stock is currently trading above a long-term strong support area, which is marked as a green color dotted line.
#8 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, which is a possible bullish indication.
#9 Bullish ADX and DI: In the weekly chart as well, the ADX indicator shows bullishness as the +DI line and the ADX line is currently above the –DI line.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for COHU is above yesterday’s high. This translates to a price of around $23.00.
Alternatively, you can purchase the shares of COHU if it corrects to the breakout level of the ascending triangle pattern, at around $20.00.
TP: Our target prices are $26 and $30 in the next 3-6 months.
SL: To limit risk, place a stop loss at $21.10 (for entry near $23) and $16.80 (for entry near $20). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 13% to 50% in the next 3-6 months.
- Entry near $23: For a risk of $1.90, the target rewards are $3.00 and $7.00. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $20: For a risk of $3.20, the target rewards are $6.00 and $10.00. This is a nearly 1:2 and 1:3 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 ascending 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 its sector.
Happy Trading!
— Tara
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