The American consumer products company based in Chesterfield, Missouri, Edgewell Personal Care Co (NYSE: EPC) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in purple color. A Falling Wedge Pattern is a bullish pattern. Once the stock moves up and breaks out from it, it has the potential to move further up.
Daily Chart – EPC
#2 Good support: The daily chart of EPC shows that the stock had formed a high volume bullish candle on May 3, 2018. This level (marked as orange dotted lines) seems like a good support area for the stock.
[hana-code-insert name=’adsense-article’ /]#3 MACD About to Move Above Signal Line: In the daily chart, the MACD (light blue color) is about to cross above the MACD signal line (orange color).
Once the cross happens, the stock has the potential to move further up.
#4 RSI –Price Bullish Divergence: The daily chart shows that there is a bullish divergence between RSI and price.
While the price had formed a lower low, RSI had formed to a higher low.
This is marked as blue dotted lines in the chart. The RSI is also moving up after reaching oversold levels. This indicates strength.
Weekly Chart – EPC
#5 Bullish Harami Pattern: In the weekly chart, the stock is currently forming a bullish harami pattern. Once the pattern is complete, the stock has the potential to move higher.
#6 RSI-Price Divergence: There is a positive divergence between RSI and price in the weekly chart. This is marked as pink dotted lines. The RSI is also moving up from oversold levels. All these points to a bullish bias.
#7 CCI moving up: The CCI indicator is currently below -100 and moving up. This is also a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for the stock is in two scenarios
- If the stock breaks out of the falling wedge pattern. This translates to a price of $43.70.
- If the stock corrects to the bottom of the falling wedge pattern. This translates to a price of around $40.50
TP: Our target prices are $50 and $65 in the next 3-6 months.
SL: To limit risk, place stop-loss at $38.50. If buying near $40, set stop loss near $36.50. Note that stop loss is on a closing basis.
Our target potential upside is 15-50% in the next 3-6 months.
- Entry at $40.50 with SL of $36.50: For a risk of $4.00, our target rewards are $9.50 and $24.50. This is a 1:2 and 1:6 risk-reward trade.
- Entry at $43.70 with SL of $38.50: For a risk of $5.20, our target reward (TP#2) is $21.20. This is a 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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