The telehealth services sector is a new but rapidly growing industry and Teladoc (TDOC) - Get Report is a major player in the space, providing on-demand virtual health care to patients over the internet or on their mobile devices. The stock started trading at $19 in June 2015 and in in less than two months rallied as high as $35, but just as quickly that momentum reversed and one year later it had dipped under $10 a share.
The weekly chart illustrates the one-year recovery process that followed the volatile first year of trading. A series of higher lows under the 38% Fibonacci retracement level of its historic range formed a large triangle in the latter half of 2016, and then a break above pattern resistance in January of this year, was followed by consolidation and retest under the 50% retracement level. This month the stock price broke above mid-range resistance at $22.35, and if the triangle price objective -- which is measured by adding the height of the pattern to the breakout level -- is realized, there is considerably more upside to the move.
The January triangle breakout was followed by one month of upside and then a rapid retest of the resistance-turned-support level. At that point, the $22.35 level was being reinforced by the rising 50-day moving average and a small morningstar reversal pattern formed at their intersection, initiating the second phase of the triangle breakout rally. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and is above its center line on both timeframes. The relative strength index has crossed above its 21 period average and center line, and these indications reflect positive price and trend momentum.
Overall volume has improved this year and Chaikin money flow is well into positive territory, suggesting strong buying interest, and with a 39% short interest in the stock continued buying generates short covering. The stock has seen a sharp jump higher this month and another pullback and retest, this time of the 50% retracement level, may be in order. Teladoc would be a long candidate after a successful retest of the $22.50 level using a trailing percentage stop.
The author holds no position in the stock mentioned.