The Texas-based provider of cloud-based enterprise work management software, Upland Software Inc. (NASDAQ: UPLD) seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: UPLD’s daily chart shows that the stock had recently formed an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level. Currently, the stock has broken out of the ascending triangle pattern, which is a possible bullish sign.
Daily Chart – UPLD
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#4 IH&S Pattern Breakout: From the daily chart, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart in orange color. An IH&S pattern is a bullish pattern.
A breakout from an IH&S pattern is usually the sign of an upcoming bullish move.
Currently, the stock has broken out of the IH&S pattern, indicating a possible bullish bias.
#5 Unbroken Uptrend: The weekly chart shows that the uptrend is still unbroken as the stock has been forming higher highs and higher lows.
Weekly Chart – UPLD
#6 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
#7 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are still in control.
#8 Above Resistance Area: The stock is currently trading above a long-term resistance area (marked as an orange rectangle). This resistance level now typically acts as a good support area after breakout.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the recommended buy level is when the stock retests to the breakout level of the ascending triangle pattern at around $38. This is to minimize the possibility of losses from a false breakout. For those with higher risk appetite, you can purchase half the intended quantity of shares at the current price of $41.09.
TP: Our target prices are $45 and $50 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $36.60. Note that this stop loss is on a closing basis.
Our target potential upside is 18% to 32% in the next 4-6 months.
- Entry at $38: For a risk of $1.40, the target rewards are $7.00 and $12.00. This is a nearly 1:5 and 1:9 risk-reward trade.
- Entry at $41.09: For a risk of $4.49, the target reward (TP#2) is $8.91. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending 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 its sector.
Happy Trading!
Tara