After a monster run from early to mid 2019, shares of WELL Health Technologies Corp. (TSX-Venture:WELL) have naturally pulled back.
Stocks can't go straight up after all; they need pauses and resets. When we plotted out two recent trends, we noticed a multi-month downtrend which began in August has recently been broken to the upside. In its place is a new uptrend which began in late-September. Add it all up, and we think this stock is revving up for another run at those summer highs.
Friday’s strong 4.23% gain on increased volume appears to finally be the breakout the stock was looking for as it was stuck underneath a key resistance level at $1.45 for close to three months. Unless the stock pulls back today, we think this breakout is the catalyst needed for a short-term rally in this name.
Looking higher up, we see further resistance up at $1.55, $1.65, $1.75 and $1.87, which was the August high. We like the potential for shares to rally back to that old level, so we’d be looking for a price target up at $1.86, or just a hair under that top level.
As for support, the first area to watch would be the recently broken $1.45 level, which should now act as support on any pullback. Below that, we would look for $1.35 and $1.25 as other static supports, along with the current dynamic support (upward trend line) at $1.39 and rising.
Knowing those key levels, we would set our stop loss at $1.33, as a significant breakdown below the $1.35 level would concern us that the fragile uptrend may be losing steam.
As mentioned off the top, it is possible that Friday’s strong close was the technical breakout we were looking for all this time. There might still be a brief pullback, but overall, we are quite bullish on this stock at these levels, so we’d be comfortable with an entry on strength.
Based on Friday’s closing price ($1.48), our upside potential looks to be 25.7% while our downside risk is limited to 10.1%. How long could it take to reach out price target, one to two months is a likely time line.
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