The American health care company that is designated as a non-bank health savings trustee by the IRS, Healthequity Inc. (NASDAQ: HQY) seems poised for a price surge according to its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As seen in the daily chart, a symmetrical triangle pattern was formed during the past few months. This pattern represents a period of consolidation before the price breaks out. A symmetrical triangle pattern 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 of the pattern 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 – HQY
#2 Above MAs: The stock price is currently above both 50-day as well as 200-day SMA. This is a possible bullish sign.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI).
This indicates a possible bullish setup.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates possible bullishness.
#6 Double Bottom Pattern Breakout: The weekly chart shows that the stock has broken out of a double bottom pattern. This is marked in orange color. The price is also currently above the 50-week as well as 200-week SMA, indicating bullishness.
Weekly Chart – HQY
#7 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color), indicating bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of shares of HQY if it trades above the last close. This translated to a price of around $86.70. The rest can be purchased if the stock corrects back to the gap support level at around $78 to $82.
TP: Our target prices are $94 and $100 in the next 4-6 months.
SL: To limit risk, place a stop loss at $74.00 (for entry near $78 to $82) and $81.70 (for entry near $86.70). Note that this stop loss is on a closing basis.
Our target potential upside is 8% to 25% in the next 4-6 months.
- Entry at $80: For a risk of $6.00, our target rewards are $14.00 and $20.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at $86.70: For a risk of $5.00, our target rewards are $7.30 and $13.30. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x 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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