Normally, I like to look at longer-term setups on Sundays. But sometimes, the longer-term weekly chart meshes so well with the short-term daily chart that we can still use both to get a picture of where a stock could be headed for the remaining portion of the year.
Workday (WDAY) fits the bill.
Like many other tech names, Workday has faced some challenges in the past few months. A large gap down near the end of May sent shares tumbling to $82 from $92 and the next month seeing shares sag further to $76. Workday has come back to life and even the daily chart looks like it could provide some long-term propulsion here. Friday's action saw the culmination of the wedge pattern taking shape the last few weeks. At first, the stock looked as if it were going to break lower, before powering higher on the day. This sets us up for a crucial test of $85.
Above $85 and price is back into the gap left from late May. At that point, there should be strong support in the $83.25-$85 range, with upside of $88-$90, although I expect the gap to be filled to $92 before the end of the year. The Relative Strength Index (RSI) is remaining in buy territory. While we struggled in June, that action seemed to shake out weak hands. The MACD flat line does a clear job in demonstrating the consolidating action of the wedge pattern. We should see that push higher next week if this bullish action is going to continue.
The longer-term weekly chart isn't quite as bullish. But it still provide a $90 price target. Note the wide channel within which Workday is trading. While we sit flush in the middle of the channel, I would note the RSI is back over 50 and we have a bullish crossover in the MACD. Also, there is another small wedge pattern with price testing resistance rather than support. Normally, I would just watch and wait for the break, which I still may do since the break is only at $85. But the daily chart suggests grabbing the first break over $85 and not waiting on a weekly close.
Furthermore, note how Workday acts within its 10-week, 10% simple moving average envelopes. Over the past two years, each time the stock tests the lower portion of this SMA, but does NOT break it, the stock then tests the upper portion of the SMA without heading lower. That is one of the driving factors behind my bullish thesis here and target of $90 rather than a drop back to $75. I would use $81 as a stop on a weekly or daily basis. Options are certainly, well, an option here with the use of calls or call spreads my preference. This isn't a set where I favor bullish put spreads because if the pattern fails, we're likely to see a full loss there. But if this get momentum, we could see even more upside than targeted.