It is no secret that stocks are prone to sudden moves in either direction. This could be triggered by economic data, geopolitical events, stock-specific news, or market sentiment.
Trading such volatile stocks are usually considered a high-risk-high-reward venture. Many traders opt to stay out of the trade rather than risk a loss. However, careful analysis of the charts could help you to enter at the right levels, thereby limiting risk to an extent.
With this in mind, we have started a new weekly series on the trending stock of the week —stocks that are featured heavily in the news.
This week’s stock pick is Nano Dimension Ltd (NASDAQ: NNDM), the leading Additively Manufactured Electronics (AME)/PE (Printed Electronics) provider. The Israeli-based company had developed a 3-D printing technology that is used to fabricate multi-material and multi-layer printed circuit boards (PCBs).
Why is NNDM trending?
The equipment specialist had started moving higher after the company announced new 3D-printing machine sales (DragonFly LDM 3D-printing machines), and posted encouraging guidance along with its third-quarter results. However, NNDM is still in the early growth stages and has had some setbacks due to Covid-19.
The company has been aggressively raising capital with several secondary offerings. It had recently inked agreements with investors for the sale of ~11.96M of ADSs at a price of $5.00/ADS, for gross proceeds of ~$60 million, strengthening its balance sheet.
Here’s how to trade NNDM right now.
NNDM Chart
On analysis, there are multiple bullish indications on the daily chart of NNDM.
#1 Stock In An Uptrend: The daily chart shows that the stock is currently in an uptrend, as it has been forming higher highs and higher lows for the past several months. This uptrend line has been marked as a pink color line in the daily chart below.
How To Trade NNDM
#2 Price Above MAs: The stock is currently above the 50-day as well as 200-day SMA, indicating that the bulls are presently in control.
#3 Bullish MACD: The daily chart shows that the MACD line (blue color) is above the MACD Signal line (orange color), which is a possible bullish indication.
#4 Bullish Stoch: The %K line (blue line) is currently above the %D line (orange line) of the stochastic which is a possible bullish sign.
Recommended Bullish Trade (based on the chart)
Buy Levels: If you want to get in on this trade, the buy level for NNDM is in three scenarios. These are marked as green color dotted lines in the daily chart.
- Buy Level #1: You can purchase the shares of NNDM if it trades above the nearest resistance level, which translates to a price of $13.00.
- Buy Level #2: You can purchase the shares of NNDM if it corrects to the previous support level, which translates to a price of $7.50.
- Buy Level #3: You can purchase the shares of NNDM if it corrects to the trendline support, which translates to a price of $6.00.
Important Note: Make sure that you only enter the trade once the daily close is above the recommended price level.
TP: Our target prices for various buy levels are as follows
- The target prices for Buy Level #1 ($13.00) are $15 and $20 in the next 3 to 6 months.
- The target prices for Buy Level #2 ($7.50) are $12 and $15 in the next 3 to 6 months.
- The target prices for Buy Level #3 ($6.00) are $12 and $15 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at the following levels.
- The stop loss for Buy Level #1 ($13.00) is $11.70.
- The stop loss for Buy Level #2 ($7.50) is $5.20.
- The stop loss for Buy Level #3 ($6.00) is $4.50.
Note that the stop loss is on a closing basis.
Target Upside: Our target potential upside is 15% to 150% in the next 3-6 months.
- Entry at Buy Level #1 ($13.00): For a risk of $1.30, our first target reward is $2.00 and the second target reward is $7.00. This is a nearly 1:2 and 1:5 risk-reward trade.
- Entry at Buy Level #2 ($7.50): For a risk of $2.30, our first target reward is $4.50 and the second target reward is $7.50. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at Buy Level #3 ($6.00): For a risk of $1.50, our first target reward is $6.00 and the second target reward is $9.00. This is a nearly 1:4 and 1:6 risk-reward trade.
In other words, this trade offers 2x to 6x more potential upside than downside.
Risks to Consider: The stock may reverse its overall trend if it breaks down from the trendline support and other support levels with 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.
Trend Reversal
In case the stock breaks down from the trendline support and closes below $4.90, it would point to the reversal of the prevailing uptrend and a short-term correction for the stock.
Happy Trading!
— Trades of the Day Research Team
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