The American company that manufactures licensed pop culture collectibles, Funko Inc. (NASDAQ: FNKO) seems to be getting ready for a price bump according to the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern during the past few months. This is marked as purple color lines. The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – FNKO
#2 Bullish MACD: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
[hana-code-insert name=’adsense-article’ /]#3 Above MAs: The daily chart shows that the stock is currently trading above its 50-day as well as 200-day SMA.
This is a bullish sign.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 Strong RSI: The daily chart shows that RSI is above 50 and moving up, indicating strength.
#6 Flag Pattern Breakout: As seen from the weekly chart, the stock was in an uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in purple color in the daily chart. Once a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case. Currently, the stock has broken out of the flag pattern, which is a possible bullish sign.
Weekly Chart – FNKO
#7 Bullish RSI: The RSI is currently moving up above 50 after reaching oversold levels. This indicates the strength of the current upmove.
#8 Bullish Stoch: The %K line of the stochastic is currently above the %D line in the weekly chart. This indicates that the stock may move higher.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of FNKO at the current price of $16.16.
TP: Our target prices are $25 and $30 in the next 4-6 months.
SL: To limit risk, place a stop loss below $12.10. Note that the stop loss is on a closing basis.
Our target potential upside is 55% to 86% in the next 4-6 months. For a risk of $4.06, our first target reward is $8.84 and the second target reward is $13.84. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with 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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