The international supply chain management outsourcing services company, Park-Ohio Holdings Corp. (NASDAQ: PKOH) seems to be poised for an upmove as per its latest charts.
#1 Channel Support: As you can see from the daily chart of PKOH, the stock has been trading within a channel for the past few months.[hana-code-insert name=’adsense-article’ /]Based on the past 5 month data, the stock has been trading within a range and whenever it has reached the top of the channel, it has faced selling pressure.
There has been demand for the stock at the lower end of the channel as is evident from the daily chart below.
Currently, the stock is trading at the lower end of the channel.
This is a good support level as the stock had previously bounced back from this lower end of the channel multiple times.
#2 Near Lower Bollinger Band: The stock had recently moved towards the lower Bollinger band and has now started moving upwards from there. At the same time, RSI is above 30 and moving up. This is usually a typical bullish setup based on RSI-Bollinger band.
#3 Gap support: There is a good gap support near the current price level. This is marked in green color in the daily chart. The stock had taken support at this level before bouncing back.
#4 RSI Nearing Oversold: In the daily chart, the RSI is near the oversold levels. This indicates that the selling pressure of the stock is easing up and the stock may reverse its current downmove.
#4 Ascending Triangle: The weekly chart of PKOH shows that the stock is currently forming an ascending triangle pattern. An Ascending Triangle pattern is a bullish pattern and a breakout from this pattern indicates a possible price surge in the near-term. Currently, the range in which the stock is trading is getting narrower, indicating that a possible breakout is around the corner.
#5 Support at 50 MA: The stock has currently taken support at its 50-week SMA. The stock has also been forming higher highs and higher lows, indicating that the uptrend is still unbroken.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PKOH at the current price of $41.70.
TP: Our first target price is $47 and the second target price is $55.
Note: In case the stock breaks out of the first target price with high volume, hold on until the stock reaches the second target price. However, if the stock shows weakness at the TP#1 level, exit the trade.
SL: To limit risk, place a stop loss at $39.80. Note that this stop loss is on a closing basis.
Our target potential upside is 13% to 32% in the next 4-6 months. For a risk of $1.90, our first target reward is $5.30 and second target reward is $13.30. 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 with high volume from the uptrend in the weekly chart. 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.
Tara[hana-code-insert name=’investorplace-article2′ /]