Pennsylvania-based company and provider of brand solutions, memorialization products, and industrial technologies, Matthews International Corp (NASDAQ: MATW) seems to be poised for a surge as per its latest charts.
Bullish Indications
[hana-code-insert name=’adsense-article’ /]#1 Near Breakout from Downtrend Channel: As you can see from the daily chart of MATW below, the stock is trading within a short-term downtrend channel for the past few months.
This channel is marked in blue color in the daily chart below.
After taking support at the bottom of the channel, the stock has started moving up and is currently near the breakout level of the downtrend channel.
This seems to be a bullish sign.
Daily Chart MATW
#2 MACD crossover: In the daily chart, the MACD line (light blue color) has crossed above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#3 Double bottom: The daily chart shows that the stock is currently forming a double bottom pattern. This is marked in green color. A double bottom pattern is a strong bullish pattern.
#4 Weekly Uptrend Unbroken: As you can see from the weekly chart of MATW, the stock has been forming higher highs and higher lows for the past few years. This uptrend is still intact.
Weekly Chart MATW
#5 Fibonacci Support: The weekly chart shows that the stock was on an uptrend from January 2016 and formed a top in January 2017. Since then, the stock has been correcting. It is now near the 23.6% Fibonacci retracement level of this move from $45 to $77.85. Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before resuming its upmove. So, this 23.6% retracement level seems like a good support area.
#6 MACD above signal line: In the weekly chart as well, the MACD line (light blue color) had crossed above the MACD signal line (orange color) and is currently above it, which is a bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy the stock in two scenarios.
#1 If the stock breaks out of the downtrend channel and crosses the long-term support-turned-resistance level. This translates to $58.10.
#2 If the stock corrects to the bottom of the downtrend channel. This translates to $49.80.
These buy levels are marked on the daily chart as green rectangles.
TP: Our first target price is $70 and the second target price is $80. Note that this stop loss is on a closing basis.
SL: To limit risk, place a stop loss at $46.50 (when entering at $49.80) and stop loss at $55.50 (when entering at $58.10)
Our target potential upside is almost 20% to 61% in the next 4-6 months.
- Entering at $49.80: For a risk of $3.30, our target rewards are $20.20 and $30.20. This is a 1:6 and 1:9 Risk-Reward trade.
- Entering at $58.10: For a risk of $2.60, our target rewards are $11.90 and $21.90. This is a 1: 5 and 1:8 Risk-Reward trade.
In other words, this trade offers nearly 5x to 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if the stock breaks down below the long-term uptrend line with 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 its sector.
Happy Trading!
— Tara
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