American stock photography, stock footage, stock music, and editing tools provider, Shutterstock Inc. (NYSE: SSTK) seems to be gearing up for a surge after a slight pullback as per its latest charts.
There are quite a few bullish indicators in Shutterstock’s charts.
Bullish Indications
#1 MA crossover: As you can see from the daily chart of SSTK below, the short-term moving average of 50-day SMA has crossed above the longer-term moving average of 200-day SMA. Such crossovers indicate a possible upcoming bullish movement. The stock is also currently trading above both 50-day and 200-day SMA, which implies that the bulls are still in control.
Daily Chart SSTK
#2 Ascending triangle pattern Breakout: SSTK’s daily chart shows that the stock had broken out of an Ascending Triangle pattern.
[hana-code-insert name=’adsense-article’ /]An Ascending Triangle pattern is a bullish pattern.This is marked on the daily chart in blue color.
The base of the triangle also generally acts a good support level.
#3 MACD above signal line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#4 IH&S Breakout in Weekly chart: As you can see from the weekly chart of Shutterstock, the stock has recently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and indicates that the stock may move higher in the short term. Typically, a stock corrects back to the breakout level of the IH&S pattern before resuming its upmove.
Weekly Chart – SSTK
#5 Long-term support level: From the weekly chart of SSTK, we can see that there is a long-term support level (marked as a green dotted line). This line is also the breakout level of the IH&S pattern (in weekly chart) as well as ascending triangle pattern (in daily chart).
The stock is also trading above its 50-week SMA which is yet another bullish indication.
#6 MACD above signal line: In the weekly chart as well, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the buy levels of SSTK is when it pulls back and reaches the breakout level of ascending triangle and IH&S pattern. This translates to $47.75.
TP: Our target price is based on the breakout from Ascending Triangle pattern. This translates to around $65.
SL: To limit risk, place a stop loss below the right shoulder of the IH&S pattern at $41.20. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 36% in the next 6 months. For a risk of $6.55, the target reward is $17.25. This is a nearly 1:3 risk-reward trade. In other words, this trade offers nearly 3X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the IH&S pattern and ascending triangle breakout level. 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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