The Atlanta-based Fortune 1000 company that distributes building and industrial products in the United States, BlueLinx Holdings Inc. (NYSE: BXC) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart of BXC shows that the stock was trading within a falling wedge pattern during the past several months. This is marked in the daily chart in purple color. Currently, the stock has broken out of this falling wedge pattern. A breakout from a bullish pattern like Falling Wedge Pattern shows that the stock has gained momentum and has the potential to move further up.
Daily Chart – BXC
#2 Trading Above MA: The stock is currently trading above its 50-day moving average as well as 200-day SMA, indicating a bullish bias in the short term.
[hana-code-insert name=’adsense-article’ /] #3 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color).This indicates a possible bullish setup.
#4 Bullish Stochastic: The %K line is above the %D line of the stochastic, indicating bullishness.
#5 Above resistance level: The stock has currently crossed an important resistance level (marked as a pink dotted line).
This implies that it could move higher.
#6 Bullish RSI: The RSI is above 50 and moving up, indicating bullishness.
#7 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. BXC has taken support at the 61.80% Fibonacci support level of the upmove, as seen in the weekly chart. This seems like a good level to bounce back upwards.
Weekly Chart – BXC
#8 Central Line Cross of %R: The William %R has crossed above the central line (-50), which is typically a bullish signal.
#9 Bullish Stochastic: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of the stock at the current price of $41.23 and the rest if the stock corrects to $37.50.
TP: Our target prices are $50 and $60 in the next 4 to 6 months based on the falling wedge pattern breakout.
SL: To limit risk, place a stop loss below $35.80. Note that this stop loss is on a closing basis.
Our target potential upside is almost 21% to 60% in the next 4-6 months.
- Entry at $37.50: For a risk of $1.70, our first target reward is $12.50 and the second target reward is $22.50. This is a nearly 1:7 and 1:13 risk-reward trade.
- Entry at $41.23: For a risk of $5.43, our first target reward is $8.77 and the second target reward is $18.77. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 13X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge pattern breakout level. 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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