The global integrated provider of treated wood products, wood treatment chemicals, and carbon compounds, Koppers Holdings Inc. (NYSE: KOP) seems to be poised for a price surge as per its latest charts.
#1 Falling Wedge Pattern: As you can see from the daily chart, KOP has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in pink 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.
#2 Good support: The daily chart of KOP shows that the stock is near a long-term support level (marked as a green dotted line). This seems like a good support area for the stock.
This is a possible bullish sign.
#4 RSI Oversold and Moving up: The daily chart shows that RSI is moving up after reaching oversold levels. This indicates the strength of the coming upmove.
#5 Unbroken Uptrend: The stock has been forming higher highs and higher lows in the weekly chart, indicating that the uptrend is still intact.
The price is also above the 200-week SMA, indicating bullishness.
#6 RSI-Price Divergence: There is a positive divergence between RSI and price in the weekly chart. While the price formed a lower low, the RSI formed a higher low. This bullish divergence is marked as blue dotted lines. Whenever there is a bullish divergence between RSI and price, the price usually starts moving up. The RSI is also moving up from oversold levels on the weekly chart. All these points to a bullish bias.
#7 CCI moving up: The Commodity Channel Index (CCI) indicator is currently below -100 and moving up. Since the CCI is moving up from oversold levels, it usually indicates the beginning of the next upmove. This is also a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy the shares of KOP at the current price of $38.90.
TP: Our target prices are $45 and $55 in the next 3-6 months.
SL: To limit risk, place stop-loss at $36.50. Note that stop loss is on a closing basis.
Our target potential upside is 16% to 41% in the next 3-6 months. For a risk of $2.40, our target rewards are $6.10 and $16.10. This is a nearly 1:3 and 1:7 risk-reward trade.
In other words, this trade offers nearly 3x to 7x 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.