Sometimes the difference between a daily chart's look and a weekly chart's one is like standing at the top of the Grand Canyon vs. standing at the bottom. That's the case with Open Text Corp. (OTEX).
OTEX would look absolutely bullish if you pulled up the daily chart and only went back to mid-May or early June:
The big number here is just above $47 a share, but that's a tedious area given the stock's current price pattern. A rising wedge resolving to the downside could easily push OTEX back to $44 or even $43. On the other hand, a resolution to the upside would allow the stock to recapture $50.
The Moving Average Convergence/Divergence (MACD) is trying to cross over to bullish, but the indicator's tight nature here demonstrates the stock's current consolidation. The 10- and 50-day Simple Moving Averages (SMAs) are also coming together, but I'd prefer to see the 10-day SMA get back over the 50.
That said, we have a decent trend developing in the Commodity Channel Index (CCI), while momentum is bullish (as shown by the Relative Strength Index (RSI) rising over 50).
But I don't want to see lower highs here. The Mass Index has fallen off, so there's plenty of room now for a new trend higher to develop. Price has held up well since the Mass Index fell back below 26, signaling that the dip in late August wasn't the start of a bearish trend.
OTEX's weekly chart leaves plenty to be desired, but there's enough to like to consider the stock as a longer-term position:
That said, earnings are forthcoming -- and given OTEX's historic volatility, you certainly want to define your risk in this stock.
The $47 price from the daily chart comes back into play here. Note that when OTEX has risen over $48 during the past 15 months, there hasn't been much history of it trading in the $48-52 area.
This could set up a very nice opportunity. The RSI looks better on the weekly chart than the daily one, and a push over 60 on the RSI should lead price.
We already have a longer-term MACD in bullish territory, so the trend is favorable. If the On Balance Volume can push over the 21-week SMA, then volume will join the bullish side as well.
This is a tight ascending-triangle pattern, so I expect resolution within the next two to three weeks. A close under $44 (not very far from where we are now) will negate the bullish setup, so you won't have to risk much to realize you're wrong about your bullish thesis and exit.
Overall, I think OTEX is an attractive risk/reward setup for those who understand how to define risk using calls or synthetic calls.