The well-known American technology company and is primarily a supplier of programmable logic devices, Xilinx, Inc. (NASDAQ: XLNX) seems to be poised for a price surge as per its latest charts.
#1 Falling Wedge Breakout: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in pink color. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
#2 MACD Above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.
This implies that the bulls are gaining control.
#4 Bullish RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#5 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines.
The +DI line is also currently above –DI line.
This indicates possible bullishness.
#6 Support At Fibonacci Level: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. XLNX had taken support at the 50% Fibonacci support level of the upmove and is now above the 61.8% Fibonacci support level, as seen in the weekly chart. This seems like a good point to bounce up higher.
#7 Flag Pattern: 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 pink 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 possible bullish sign.
#8 Bullish RSI: The RSI is above 50 and moving up in the weekly chart as well. This is a possible bullish sign.
#9 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the weekly chart. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of XLNX at the current price of $114.23.
TP: Our target prices are $120 and $130 in the next 3-6 months.
SL: To limit risk, place stop-loss at $110.40. Note that the stop loss is on a closing basis.
Our target potential upside is 5% to 14% in the next 3-6 months. For a risk of $3.83, our target rewards are $5.77 and $15.77. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x 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 a 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.
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