Pinduoduo Inc – ADR (NASDAQ: PDD) seems to be poised for a price surge as per its latest charts. The company is the largest agriculture-focused technology platform in China. It has created a platform that connects farmers and distributors with consumers directly through its interactive shopping experience.
The stock was also a part of our recent watchlist for breakout stocks.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as pink color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
PDD – Daily Chart
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA, indicating that the bulls are gaining control. This is a positive indication.
#3 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 –DI and +DI lines. This indicates possible bullishness.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating 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 Above Support Area: As you can see from the weekly chart, the stock has currently broken out of a downtrend (marked as a purple color line) and is also moving higher from a support level which is marked as an orange color dotted line. This looks like a good area for the stock to move higher.
PDD – Weekly Chart
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart, indicating bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently nearing 50 and moving higher. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PDD above the price of around $48.40.
TP: Our target prices are $56 and $63 in the next 3-6 months.
SL: To limit risk, place stop-loss at $43.80. Note that the stop-loss is on a closing basis.
Our target potential upside is 16% to 30% in the next 3 to 6 months.
For a risk of $4.60, our target rewards are $7.60 and $14.60. 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 symmetrical triangle pattern 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.
Happy Trading!
— Tara
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