UNITY: Chart of the Week
We’re going to profile Unity Software Inc; U is the symbol.
The chart shows a huge move on Tuesday with a huge short squeeze. How do we know it’s a short squeeze? Look at all the shorts that entered into the name from about a week and a half ago up until Tuesday. This pulled the stock all the way down to about the 20-day moving average, which is this dotted line.
It gapped up yesterday and kept that gap open. It really shot up close near the highs of the session on Tuesday. If we get a continuation of this big push from Tuesday, which was on very good volume, we could see the stock making a run at least to the recent highs of about $45 – maybe even a little bit higher than that.
The weekly chart shows upside to come
Let’s take a look at the weekly chart. This has my interest as well. You can see that since the end of fall 2022, the stock has been trading in a box for the past nine months, all the way down to about $24 and all the way up to $42, which is where it’s at right now. I think that this is going to make a move through the box; we’re in the cloud right now. Once we get through that box, it’s got some upside to go. We’ve got $60, which is the high from last summer year, and the $69.50 area, which is the 200 week moving average. There’s some room left on this stock to make to make a run.
I ran a Fibonacci from $200 all the way down to $25 for a 72% retracement. There’s some room to go for Unity.
The daily chart and indicators are bullish
Let’s look at the daily chart. You can see the stock has been basing for a good 6 1/2 to 7 months, from November to right now. We’re trying to break out above the $42 level. The stock is showing candles that are light blue, which is strong bullish on the go-no-go indicator.
We also have the MACD, which looked like it was about ready to cross over, but after the short squeeze yesterday, it’s right back onto a bull signal.
The TDI (Traders Dynamic Index), which reflects relative strength versus bollinger bands, has bounced here and is still bullish.
The interesting one is the stochastics momentum indicator. It looked like they were crossing under zero and we crossed right back up again yesterday after this big squeeze in price. It’s now turning bullish and we could get a run right back up to the $50 or $55 level. If that happens we’ll see the stock moving right back up again.
I did buy some calls on the stock recently, most of them on Tuesday. I do like the the structure of the stock here with higher highs and higher lows. I’m at the August or September on the $40 calls and $45 calls as well.
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