The American bio-science company engaged in designing, developing, manufacturing, and distributing orthopedic implants and instruments for pediatric issues, Orthopediatrics Corp (NASDAQ: KIDS) seems to be gearing up for a surge as per its latest charts.
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock was recently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color lines. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts as a good support level. Currently, the stock has broken out of the ascending triangle pattern, which is usually a bullish sign.
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
The +DI line and the ADX lines are also now above the –DI line.
All these indicate possible bullishness.
#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 MACD above signal line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color). This is a bullish indication.
#6 Unbroken Uptrend in Weekly Chart: As evident from the weekly chart, the stock’s prevailing uptrend is still unbroken. This is a bullish sign. The stock is also above its 50-week SMA, which indicates that the bulls are currently in control.
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for KIDS is if it corrects to the price of around $50 to $53. Alternatively, you can purchase the shares of KIDS if it trades above yesterday’s high, which translates to a price of $56.00.
TP: Our target prices are $60 and $65 in the near-term.
SL: To limit risk, place a stop loss near $46 (for entry near $51.50) and $53.40 (for entry near $56.00). Note that this stop loss is on a closing basis.
Our target potential upside is 7% to 26% in the next 3-6 months.
- Entry near $51.50: For a risk of $5.50, the target rewards are $8.50 and $13.50. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $56.00: For a risk of $2.60, the target rewards are $4.00 and $9.00. 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 ascending 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.
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