Global technology-solutions provider and Fortune 500 company, Arrow Electronics, Inc. (NYSE: ARW) seems to be getting ready for a surge according to its latest charts.
There are quite a few bullish indicators in the daily and weekly charts of ARW.
#1 Ascending Triangle Breakout: As you can see from the daily chart of ARW, the stock had broken out of an ascending triangle pattern on 18th January 2018. This is marked as blue lines in the chart below. An Ascending Triangle pattern is a bullish pattern and indicates a possible price surge in the near-term.
[hana-code-insert name=’adsense-article’ /]#2 MACD Above Signal Line: As you can see from the daily chart, the MACD line is currently above the signal line, indicating a bullish bias.
#3 Above 50-day and 200-day SMA: The price of the stock is currently above the 50-day SMA and 200-day SMA indicating bullishness for the stock.
#4 Weekly Ascending triangle pattern Breakout: ARW’s weekly chart also shows that the stock had broken out of an Ascending Triangle pattern. This is also a good bullish indication.
#5 MACD Line Above Signal Line: The weekly chart of ARW shows that the MACD Line has crossed above the signal line and is moving up. This shows that the bulls are still in control.
#6 Unbroken Uptrend: As you can see from the weekly chart of Arrow Electronics, the stock has been on an uptrend since the past year as the price has been making higher highs and higher lows. This uptrend (marked in blue color on the weekly chart) is still unbroken, indicating the strength of the bulls.
Note: The stock may correct until $84 (which is the ascending triangle breakout level) before resuming its current price surge as the RSI is currently overbought.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy half the quantity at the current price of $86.42 and the remaining half when the stock pulls back to the breakout level of $84. This is marked in the weekly chart as a green rectangle.
TP: Our target price is based on the Ascending Triangle pattern breakout. This translates to around $94. NOTE: Hold onto the trade if the stock breaks out of the target price with high volume. The second target price (TP#2) is $100.
SL: To limit risk, place a stop loss at $81.80. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 8.8% in the next months. For a risk of $4.62, the target reward is $7.58. This is a nearly 1:2 risk-reward trade. In other words, this trade offers nearly 2X more potential upside than downside.
Note: For TP#2, the potential upside is nearly 16% and has a risk-reward of 1:3.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle 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 its sector.