Tencent Music Entertainment Group (NYSE: TME) seems to be poised for a price surge as per its latest charts. The company’s online music entertainment platforms provide music streaming, online karaoke, and live streaming services in the People’s Republic of China.
It offers QQ Music, Kugou Music, and Kuwo Music that enable users to discover music in personalized ways; and WeSing, which enables users to sing from its library of karaoke songs and share their performances in audio or video formats with friends.
Bullish Indications
#1 Ascending Triangle Pattern: The daily chart shows that the stock had recently formed 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.
TME – Daily Chart
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in 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 the –DI and +DI lines. This indicates possible bullishness.
#5 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are still in control.
TME – Weekly Chart
#6 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently above 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 shares of TME above the price of around $9.45.
TP: Our target prices are $12.30 and $15.00 in the next 3-6 months.
SL: To limit risk, place stop-loss at $7.80. Note that the stop-loss is on a closing basis.
Our target potential upside is 30% to 59% in the next 3 to 6 months.
For a risk of $1.65, our target rewards are $2.85 and $5.55. 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 ascending 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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