The popular fast food restaurant chain that is best known for their hot dogs, Nathan’s Famous, Inc. (NASDAQ: NATH) seems to be ready for a bounce-back as per its latest charts.
Following are the bullish indications for NATH in its charts.
Bullish Move – Chart Indications
#1 Support near key Fibonacci Level: The stock had been on an uptrend from $54.63 and formed a top at $100.05 around November 17, 2017.
[hana-code-insert name=’adsense-article’ /]Since then, the stock has been correcting. It has now taken support at the 61.8% retracement level of the move from $54.63 to $100.05.Fibonacci retracement levels indicate that the key Fibonacci ratio of 61.8% is around $72.
The stock has currently taken support near this level, indicating that NATH is quite unlikely to break down from here.
Typically, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again.
#2 Demand Area: As you can see from the daily chart of NATH, the stock is currently near a demand area. This demand area was formed between September 27 and October 19, 2017, before the stock made a big upmove. This demand area is marked as a blue rectangle in the daily chart below. Now, the stock has corrected back to this demand area. This is a good support area.
#3 Doji: The latest daily candlestick is a Doji for NATH. This shows indecisiveness between buyers and sellers and the stock might reverse from here.
#4 Oversold RSI: The daily chart of NATH shows that RSI is currently below 30, indicating that it is oversold. This shows that selling momentum has decreased and the stock could reverse from here.
#5 Gap Support: The stock’s weekly chart shows that the stock price is currently near the long-term gap support (marked as the purple line) of $72.50. This indicates that the stock may move upwards from this level.
#6 Fibonacci Levels: The weekly chart of NATH also shows that the current price has taken support at the key Fibonacci ratio of 61.8%.
#7 Reversal Candle: The latest candle on the weekly chart is a reversal candle and is formed at the support level.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of Nathan’s Famous Inc. at the current level of $74.50.
TP: Our target price is the previous high price of $100.50.
SL: To limit risk, place a stop loss at $71.40, which is below the weekly low. Note that the stop loss is on a closing basis.
Our target potential upside is nearly 35% in the next 4-5 months. For a risk of $3.10, our target reward is $26. In other words, this trade offers 8x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the long-term weekly gap support 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