The technology company that is the inventor of several patented innovations, Digimarc Corp (NASDAQ: DMRC) seems to be poised for a price surge according to its charts.
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily charts shows that a symmetrical triangle pattern is being formed for the stock. This is marked in blue color. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is an indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
Daily Chart – DMRC
#2 AO Cross: Whenever the Awesome Oscillator crosses above the zero line, it indicates that the short-term momentum is rising faster than the long-term momentum. Currently, the AO has crossed above zero line, indicating bullishness.
[hana-code-insert name=’adsense-article’ /] #3 Channel: As you can see from the daily chart, the stock has been trading within a channel during the past few months.This is marked in the daily chart in orange color.
Currently, the stock is near the lower end of the channel.
A breakout from the channel could cause the stock to move higher.
#4 Oversold RSI: The RSI is near oversold levels, indicating that the price may move higher soon.
#5 Double Bottom: The stock is currently forming a double bottom pattern in the weekly chart. This is marked in the chart in pink color. This is a bullish reversal pattern and the breakout from it would indicate that the stock could possibly move upwards.
Weekly Chart – DMRC
#6 MACD above Signal Line: In the weekly chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy half the intended quantity of the stock above the symmetrical triangle breakout level of around $30.50 and the rest after the breakout from the channel at around $34.
TP: Our first prices are $40 and $50 in the next 4-6 months.
SL: To limit risk, place a stop loss at $27.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 31% to 64% in the next 4-6 months.
- Entry at $30.50: For a risk of $3.00, our target rewards are $9.50 and $19.50. This is a 1:3 and 1:7 risk-reward trade.
- Entry at $34: For a risk of $6.50, our target reward (TP#2) is $16. This is a 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 7x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. 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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