Melco Resorts & Entertainment Ltd (NASDAQ: MLCO) seems to be poised for a price surge as per its latest charts. The Hong-Kong based company is a developer, owner, and operator of integrated resorts with entertainment and casino gaming facilities in Asia and Europe.
Bullish Indications
#1 Breakout from Consolidation area: The daily chart shows that the stock was consolidating within a price range for the past few days. This area is marked as a pink color rectangle. The stock has now broken out from this consolidation area with high volume and is currently trading above it. The breakout level of this consolidation area typically acts as a good support level.
MLCO – 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 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 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.
#5 Bullish Stoch: The %K line (blue color) is above the %D line (orange color) of the stochastic in the daily chart, indicating possible bullishness.
#6 Downtrend Channel Breakout: As you can see from the weekly chart, the stock has been trading within a downtrend channel for the past several weeks. This is marked in the chart in orange color lines. The stock has currently broken out of a downtrend channel and is moving higher, indicating bullishness.
MLCO – Weekly Chart
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of MLCO above the price of around $7.00.
TP: Our target prices are $8.50 and $10.00 in the next 3-6 months.
SL: To limit risk, place stop-loss at $6.20. Note that the stop-loss is on a closing basis.
Our target potential upside is 21% to 43% in the next 3 to 6 months.
For a risk of $0.80, our target rewards are $1.50 and $3.00. This is a nearly 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 from the breakout level of the consolidation area 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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