The US-based technology company that provides cloud-based services for remote control, home automation and monitoring services, Holdings (NASDAQ: ALRM) seems to be gearing up for a surge as per its latest charts.

Bullish Indications

#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has broken out of a Symmetrical Triangle pattern. This pattern is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.

Daily Chart – ALRM

#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA. This usually implies a possible bullish bias for the stock.

#3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and ADX has started rising from below both (+DI) and (-DI).

#4 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.

#5 Bullish RSI: The RSI is currently above 50 and moving higher, indicating the bullishness of the current upmove.

#6 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. ALRM had taken support at the 50% Fibonacci support level of the upmove, as seen in the weekly chart, after which it started moving higher. This is a possible bullish sign.

Weekly Chart – ALRM

#7 Bullish MACD: The MACD line is currently above the MACD signal line in the weekly chart, indicating possible bullishness.

#8 Bullish RSI: The RSI is currently above 50 and moving up in the weekly chart as well. This is a possible bullish indication.

#9 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the weekly chart. This indicates possible bullishness.

#10 Price above MA: The price is currently above the 200-week SMA, indicating that the bulls are still in control.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, you can purchase the shares of ALRM above the price of $49.70.

TP: Our target prices are $55 and $60 in the next 3-5 months.

SL: To limit risk, place a stop loss at $46.80. Note that this stop loss is on a closing basis.

Our target potential upside is nearly 11% to 21% in the next 3-6 months.

For a risk of $2.70, the target rewards are $5.50 and $10.50. This is a nearly 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 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 its sector.

Happy Trading!


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