One of the leaders in providing patient-specific, data-driven technology and solutions that enable healthcare organizations to optimize patient outcomes, lower healthcare costs, and improve organizational performance, Tabula Rasa HealthCare Inc. (NASDAQ: TRHC) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Head and Shoulders Pattern: The daily chart shows that the stock has been forming a head and shoulders (H&S) pattern. This pattern is marked in orange color in the daily chart. A head and shoulders pattern is a bearish pattern and a breakdown from it usually indicates that the stock may move lower. Currently, the stock is nearing the breakdown level of the H&S pattern.
Daily Chart – TRHC
[hana-code-insert name=’adsense-article’ /]#2 Price below MAs: The price is currently below both 50-day as well as 200-day SMA in the daily chart, indicating bearishness.
#3 Bearish Stochastic: The stochastic in the daily chart shows that the %K line is below the %D line.
This is also a possible bearish sign.
#4 Weakening Uptrend: The weekly chart of TRHC shows that the stock is currently near the support level of the uptrend.
This uptrend line is marked in purple color in the weekly chart below.
A breakdown from an uptrend usually indicates weakness.
Weekly Chart – TRHC
#5 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color) in the weekly chart. This typically indicates possible bearishness.
#6 Near resistance level: The weekly chart shows that the stock is currently trading near a resistance level. This level is marked as a pink color dotted line. This seems like a good area for the stock to correct.
#7 Bearish Aroon: The Aroon indicator shows bearishness in the weekly chart as the Aroon up is below 30 and the Aroon down is above 70.
#8 Bearish RSI: The RSI is below 50 and moving down, indicating possible bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for TRHC is below the breakdown level of the Head and Shoulders Pattern at around $54.50.
TP: Our target prices are $45 and $40 in the next 4-6 months.
SL: To limit risk, place a stop loss at around $59.70. Note that this stop loss is on a closing basis.
Our target potential downside is almost 17% to 27% in the next 4-6 months. For a risk of $5.20, our target rewards are $9.50 and $14.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it continues to move up without breaking down from the H&S pattern or move above the breakdown level of the H&S pattern after the breakdown. The breakout of the stock could be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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