Fundamentals
Technicals
Trade
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- Not my usual play, but I do like to tell myself that I have developed a keen eye for reversals. So let's see if this one works out
- Udemy is an Edutech firm with surprisingly good fundamentals, considering the stock price would probably be telling you otherwise
- Valuation is not extended (compared to the current market standards - P/S = 2.8), the sales growth is reliable and strong while the firm is nearing profitability
- The business carries high margins and if it remains on the current trajectory, it is bound to become a highly profitable firm.
- And as a bonus, it does not have any debt!
- The thing I like the most though is the support the stock is getting from the overall education sector. Look at the charts of
DUOL
or
COUR
(which I recently covered in another post) to see how strongly these stocks have been performing
Technicals
- Reversals are very tricky, but there is a couple of signals to always look out for
- The stock broke the series of lower lows and lower highs and is establishing a new higher high
- The price broke cleanly through all moving averages
- And it has done so on very positive news that carried the stock 30% higher. Most importantly, we can see follow-through in price; not collapsing higher or consolidating, but rather marching higher
- RSI is breaking towards new highs despite the stock being price-depressed and stochastics are showing a strong momentum
- I do not know if this trade lives up to the expectations, but this is how I would imagine an ideal reversal
Trade
- Putting on the trade is rather tricky, I am not going to lie. Hence why I have not put it on myself either
- The next support levels are unfortunately 10% away (the black line) and the stock price has not properly pulled back. A good sign of the underlying strength, but bad if one wants to enter the trade
- One option is to wait a bit but risk the trade running away from you. This is what I am going to choose because my own risk management would not let me enter the trade at this price.
- The other choice is to get in now. In that case, I am going to leave it to each and every one of you to pick your own spot for a stoploss. At this point, there is only one viable level that I can see, which is around the black line depicted on the graph
- By the way, a really good pick for a long-term investment if someone is interested in that
Follow me for more analysis & Feel free to ask any questions you have, I am happy to help
If you like my content, Please leave a like, comment or a donation, it motivates me to keep producing ideas, thank you :)
