This software stock is bucking the latest tech rout and breaking out
(See the video above for Jay’s complete chart breakdown.) Unity Software provides the tools developers use to build video games and interactive 3D experiences, along with advertising technology that helps them make money from those creations. After a prolonged struggle (remember the Saaspocalypse?) the stock showed signs of life following this past week’s earnings. Shares jumped roughly 15% on Thursday, while the S & P 500 dropped by over 4%. Clearly investors are beginning to believe Unity’s turnaround is gaining traction. Now we’ll look at the charts to see whether buyers can build on that momentum. Let’s jump in… On a daily basis going back over the last year we see the extent of the turnaround. Shares bottomed in the spring and began their rebound. While we have missed this move we do see a potential longer-term breakout and a great risk/reward entry point to attack. The stock is checking every box on my major reversal checklist and has one more hurdle to clear. Key Points Shares have reversed after forming a double bottom Shares have recaptured its key moving averages in the 50 and 200-day Shares broke out of a bullish flagging pattern on a gap Shares still have something to reverse… The last point is the key — we still have something to reverse. The last hurdle is to clear this $50 level and close above it for a few consecutive days. To see that upside potential and set risk parameters we look at the chart on a weekly time frame going back to its September 2020 IPO. This is the perspective I like — we see defined risk and a nice upside potential reward. Our upside targets take shares back to minor resistance of $60 over the near-term and a longer price target should see shares swing back to the $80 level. The trade We like buying shares here and anticipating the momentum can continue higher. However, given market conditions and its recent surge, shares may struggle to break out at this juncture. If so, we want to buy any dip back to the $45 and use $42 as our stop loss. If we trade back to that level, it means we filled the earnings gap and the idea isn’t happening. Revisit entering the name at its Anchored VWAP form the IPO at $36.75. The upside potential is far greater. If momentum continues and we can hold this $50 level we see a quick rally to $60 and a three month target of $80. In a volatile market its tough to time things perfectly, but with its earnings report out we have definable technical areas to give us a trade worth the risk. —Jay Woods with Chase Games DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
