Casa Systems ( CASA) gapped higher Monday morning on the heels of announcing that Verizon ( VZ) was investing about $40 million in the company's common stock for a 9.9% stake. Also, the company won a multi-year contract to provide 5G network functions. Casa Systems offers building blocks for 5G transformation. Let's check out the charts and indicators.
In this daily bar chart of CASA, below, we can see that prices gapped higher Monday. Prices gapped above both the declining 50-day moving average line, but also above the declining 200-day line. Trading volume has surged and the scaling makes the prior turnover look insignificant. The On-Balance-Volume (OBV) is going straight up and the Moving Average Convergence Divergence (MACD) oscillator will be crossing above the zero-line for an outright buy signal. Unfortunately, prices only stabilized for about two months before today's strength. Two months is too small of a base in my opinion.
In this weekly Japanese candlestick chart of CASA, below, we can see that prices made a rally in 2020 and then declined back down. Today's price action is not charted yet, but it will put prices above the declining 40-week moving average line. The weekly OBV line shows a rise for more than two years and that is very positive. The MACD oscillator is crossing to the upside for a cover shorts, buy signal.
In this daily Point and Figure chart of CASA, below, we can see an upside price target of $10.75.
In this weekly Point and Figure chart of CASA, below, we see a $12 price target.
Bottom line strategy: The move by Verizon gives Casa a lot of credibility, but I want to see more sideways movement in the stock. If I were to recommend buying CASA now, it would have to suggest a stop at $3.50 and for me that is too much of a risk, relative to the price targets I see. After a period of sideways consolidation a better risk/reward set up may present itself. Be patient.
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