The United States-based provider of residential solar electricity, headquartered in San Francisco, California, Sunrun Inc. (NASDAQ: RUN) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As you can see from the daily chart, RUN had recently formed a symmetrical triangle pattern. This pattern is shown as purple lines. 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 line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, indicating bullishness.
Daily Chart – RUN
#2 MACD above Signal Line: The MACD line (blue color) is currently above the signal line (orange color) in the daily chart, indicating a bullish bias.
[hana-code-insert name=’adsense-article’ /]#3 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.#4 Bullish RSI: The RSI is currently moving up after reaching oversold levels.
This indicates that the stock may move higher.
#5 %K above %D in Stochastics: The stochastics oscillator shows that the %K (blue) line is currently above the %D (orange) line.
This indicates possible bullishness.
#6 Flag Pattern Breakout: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart in purple color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern, which is a bullish sign.
Weekly Chart – RUN
#7 Resistance-turned-support level: There is a resistance-turned-support level close by for the stock. This is marked as a green dotted line. This seems like a good area for the stock to bounce back upwards.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level is if the stock corrects to the breakout level of the symmetrical triangle pattern at around $13. But for those with a higher risk appetite, you can purchase half the intended quantity of shares of RUN at the current price of $14.53.
TP: Our target prices are $17 and $25 in the next 4-6 months.
SL: To limit risk, place a stop loss at $11.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 31% to 92% in the next 4-6 months.
- Entry at $13: For a risk of $1.50, our target rewards are $4.00 and $12.00. This is an almost 1:3 and 1:8 risk-reward trade.
- Entry at $14.53: For a risk of $3.03, our target reward (TP#2) is $10.47. This is an almost 1:3 risk-reward trade.
In other words, this trade offers nearly 3x to 8x 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
[hana-code-insert name=’MMPress’ /]