My Watchlist [67]: U... Returning to 39.74?
*TA as of 28/2/24
Hi everyone! Today I’ll be updating my TA for another video game company:
Unity Software Inc. (NYSE: U)
U continues to base in a symmetrical triangle consolidation pattern at lows, with lower highs and higher lows. Most notably, U dumped to the lower trendline on an ER miss, forming a higher low in the process. Whether this pattern breaks to the upside or downside, is a question for another day. For now, it is rangebound.
Several things to break down here on the daily chart - notice how U is trading in a falling wedge pattern once more back to lows, similar to the last time round. The stock has retraced about 61.8% of its move assuming a 43.54 swing high and a 22.20 swing low. A hidden bullish divergence has been quietly forming over the past few months, cumulating in a return to the lower ascending trendline. We can also see a small bullish divergence forming with the post-ER dump. This usually pre-empts a reversal, based on what I’ve observed on other stocks.
Where can we go from here?
A breakout of this falling wedge can see a short-term retest between 38.85-39.74. A breakout of the entire symmetrical triangle pattern can see a grind up towards each of the prior lower highs, with the first at 43.54, and the last at 62.14. A breakdown should see a test of the 78.6% Fib retracement at 26.77 (and lower).
Sentiment: BUY
Summary (with Price Targets - NFA):
Symmetrical triangle consolidation pattern that favours upside. Range-bound until it breaks out or down from the pattern. Near-term should see 38.85-39.74, with a break out seeing 43.54 and a break down seeing 26.77 (78.6% Fib retracement) and lower.
Investors can accumulate around current levels down to the 26-27 area. Reconsider the position if we form a lower low in the pattern, otherwise this might be a “patient” play over the longer term.
All right, that’s all for this newsletter. Till the next one!
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