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Semiconductor equipment company Qorvo Inc. (NASDAQ: QRVO) seems to be ready for a big upmove in the next 3-4 months as per its latest charts.
There are quite a few bullish indicators in QRVO’s charts.
#1 Channel Support: As you can see from the daily chart of QRVO below, the stock has been trading inside a channel for the past few months. Right now, it has taken support at the lower end of the channel. After testing the lower end of the channel on 14th December, the stock has again retested the channel yesterday and taken support at the lower channel.
#2 Doji: The latest candlestick in the daily chart is a Doji, which is a sign of a possible reversal to a bullish bias.
#3 RSI-Price Positive Divergence: In the daily chart of QRVO, there is a positive divergence between price and Relative Strength Index (RSI).
While the stock’s price is making lower lows, the RSI is making higher lows.
This is called as a positive divergence and is marked on the chart as blue dotted lines.
This implies that price might reverse and start moving upwards again.
The RSI is also near the oversold level, further indicating a possible reversal from this level.
#4 Trend Line Support: From the weekly chart of QRVO, it is evident that the stock is currently on an uptrend as the price is making higher highs and higher lows. The latest weekly candle shows that the stock has taken support at the trend line as shown in the figure below.
#5 Support Level: The weekly chart of QRVO also shows that the stock is currently near a long-term support level (Orange line). This also further confirms the possibility of an upcoming reversal.
#6 Double Bottom: In the weekly chart of QRVO, a double bottom is currently being formed. A Double bottom pattern is a bullish reversal pattern, indicating that the stock would possibly move upwards shortly.
#7 Oversold RSI: In the weekly chart, the RSI is near the oversold levels. This is also a possible bullish sign.
If you want to get in on this trade, you can purchase shares of QRVO at the current price level of $65.90.
Our target price is the top of the channel in the daily chart. This translates to around $80.
To limit risk, place a stop loss at $63.50, which is below the current low of the daily chart. Note that this stop loss is on a closing basis.
Our target potential upside is 21.4% in the next 3-4 months. For a risk of $2.40 per share, our target reward is $14.10, making this a 1:6 risk-reward trade. In other words, this trade offers nearly 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the long-term support level. 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.