The leading provider of healthcare solutions and services for community hospitals and post-acute care facilities, Computer Programs & Systems, Inc. (NASDAQ: CPSI) seems to be getting ready for a price bump in the short-term as per the latest charts.

Bullish Move – Chart Indications

#1 Downtrend Channel Pattern Breakout: As you can see from the daily chart of CPSI, the stock has been forming a downtrend channel during the past several months. This is marked in pink color in the daily chart below. The stock had typically taken support at the bottom of the channel before bouncing back. The stock has currently broken out of the downtrend channel, indicating possible bullishness.

Daily Chart – CPSI

#2 Double Bottom Pattern Breakout: Within the downtrend channel, the stock had formed a double bottom pattern. This is marked in the daily chart in orange color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards. Currently, the stock has broken out of the double bottom pattern, indicating a bullish bias.

#3 Price above MAs: The stock is currently above the 50-day as well as 200-day SMA, indicating that the bulls are currently in control.

#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color).

This indicates a possible bullish setup.

#5 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).

#6 Near Support Area: The weekly chart shows that the stock had moved up from a support area. This support area is marked as a green dotted line. This seems like a good area for the stock to move higher.

Weekly Chart – CPSI

#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.

#8 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 in the weekly chart. This indicates possible bullishness.

#9 Bullish MACD: The MACD line is above the signal line in the weekly chart as well, indicating a possible bullish bias.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of CPSI at the current price of $26.84. The rest can be purchased above the triple bottom resistance level of $35.

TP: Our target prices are $35 and $40 in the next 3 to 6 months.

SL: To limit risk, place a stop loss at $22.40 (for entry near $26.84) and $32.20 (for entry near $35). Note that the stop loss is on a closing basis.

Our target potential upside is 14% to 49% in the next 3-6 months.

  • Entry near $26.84: For a risk of $4.40, our target rewards are $8.20 and $13.20. This is a nearly 1:2 and 1:3 risk-reward trade.
  • Entry near $35: For a risk of $2.80, our second target reward is $5.00. This is a nearly 1:2 risk-reward trade.

In other words, this trade offers 2x to 3x more potential upside than downside.

Risks to Consider

The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level with 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!


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