The online personal styling service in the United States, Stitch Fix Inc. (NASDAQ: SFIX) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart of SFIX shows that the stock was trading within a falling wedge pattern during the past few months. This pattern is marked in the daily chart in pink color. The stock has currently broken out from it. Once the stock moves breaks out from a bullish pattern like the Falling Wedge Pattern, it has the potential to move further up.
Daily Chart – SFIX
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the MACD signal line (orange color). This is a possible bullish setup.
#3 Price above MA: The price is currently above both the short-term moving average of 50-day SMA.
This usually implies a possible bullish bias for the stock.
#4 Bullish RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#5 Strong Stoch: The stochastic is currently moving up and the %K line is currently above the %D line.
This usually indicates bullishness.
#6 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the weekly chart as well.
Stochastic is also moving up from oversold levels. These are all possible bullish signs.
Weekly Chart – SFIX
#7 Bullish RSI: The RSI is currently moving up from oversold levels in the weekly chart. This is a possible bullish sign.
#8 Bounce back from support level: The weekly chart shows that the stock has currently bounced back from a strong support area. This area is marked as an orange dotted line. This is a possible bullish sign.
#9 High volume candle: The weekly chart shows that a high volume candle was formed last week. This is marked as a pink color ellipse. A high volume candle during a downtrend typically indicates that the buyers are coming in. This is also a bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for SFIX is above the resistance level of $22.
TP: Our target prices are $30 and $37 in the next 4 to 6 months.
SL: To limit risk, place a stop loss below $17.90. Note that this stop loss is on a closing basis.
Our target potential upside is almost 36% to 68% in the next 4-6 months.
For a risk of $4.10, our first target reward is $8.00 and the second target reward is $15.00. This is a nearly 1:2 and 1:4 risk-reward trade.
Overall, 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 with high volume from the falling wedge 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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