DXCM Long Swing Analysis
DXCM offers a compelling swing trade setup, with a strong base forming over the past 4 months around a critical support zone of $74–$68. Following a drop on July 2024 earnings, the stock remains resilient, supported by robust revenue figures and, in my view, a superior CGM product that sustains DXCM’s competitive edge. Technically, multiple time frames (daily, 2-day, 3-day, and weekly) reveal a confluence of support and bottoming signals in this zone, indicating a solid foundation for potential upside.
Key Technical Support: Over the last 4 years, we’ve seen multiple touches in this support range, especially on daily to weekly time frames. Each time DXCM has tested this zone, it has bounced back to higher levels, often rallying toward the $138–$164 range. This $74–$68 area, frequently tested since March 2020, appears to serve as a strong demand zone. Currently, the stock has been consolidating here for over 111 days, suggesting a stable base and low downside risk if support holds.
Entry, Stop-Loss, and Secondary Support: Based on daily and multi-day analysis, ideal entry points for this swing trade are within $66.98 to $74.84, where the risk/reward is favorable. Set a primary stop-loss near $62 to protect against unexpected volatility. A secondary support range at $74.84–$79.49 provides an additional buffer, and entries above $74.84 could set a stop just below this level, using it as local support.
Exit Targets and Risk/Reward:
First Target: Aiming for a target of ~$125, which provides a risk/reward ratio of around 4:1 and represents approximately a 67% gain from a $74.84 entry. This level aligns with prior areas of resistance and makes for a reasonable first profit-taking point.
Second Target: Targeting the $139–$142 range, where prior highs have shown resistance. This target represents a 5:1 risk/reward ratio, offering up to an 87% potential upside. Achieving this target would allow for significant gains, aligning with past price action patterns when DXCM has bounced from the current demand zone.
Historical Context and Revenue Insights: DXCM has shown strong rallies from this demand zone, driven by robust revenue and earnings growth. In June 2022, after testing support, the stock rallied 65% over 160 days, with revenues growing 17-18% YoY in Q2 and Q3. Similarly, in October 2023, DXCM gained 67% over 96 days, supported by a 27% YoY revenue increase in Q3.
In Q2 and Q3 2024, while growth has slowed to 2-5%, revenues remain solid at around $1 billion, indicating stability. The current 111-day consolidation suggests another base formation, aligning with historical patterns of recovery.
