The multinational lifestyle retail corporation headquartered in Philadelphia, Pennsylvania, Urban Outfitters, Inc. (NASDAQ: URBN) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#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.
Daily Chart – URBN
#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.
#3 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line.
This is a possible bullish indication.
#4 Bullish ADX: The ADX line is currently moving up from below –DI and +DI lines. The +DI line is also currently above –DI line.
This indicates possible bullishness.
#5 Near Support Level: The weekly chart shows that the stock is near a strong support level.
This level is marked as a purple dotted line.
Previously, the stock had taken support at this level before moving higher. This seems like a good area for the stock to bounce higher.
Weekly Chart – URBN
#6 Oversold RSI: The RSI is moving up from oversold levels in the weekly chart. This is a possible bullish sign.
#7 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line. The stochastic is also moving up from oversold levels. All these are possible bullish indications.
#8 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for URBN is above the previous high candle in the daily chart. This translates to a price above $24.30.
TP: Our target prices are $30 and $35 in the next 3-6 months.
SL: To limit risk, place stop-loss at $20.90. Note that the stop loss is on a closing basis.
Our target potential upside is 24% to 44% in the next 3-6 months. For a risk of $3.40, our target rewards are $5.70 and $10.70. This is a 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 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.
Happy Trading!
Tara
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