The global diversified industrial company with multiple market-leading brands software, Hillenbrand, Inc. (NYSE: HI) seems to be poised for a price surge as per its latest charts.
#1 Breakout from Flag Pattern: The stock was in an uptrend until December 2017. After that, the stock was in a consolidation phase. This is a classic flag pattern, which is marked as orange lines in the daily chart. HI broke out of the flag on March 8, 2018, and continued its uptrend. Typically, after a breakout from the flag pattern, there would be a correction to the breakout level once again before continuing the upmove.
#2 Ascending Triangle Breakout: Hillenbrand’s daily chart shows that the stock had broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in blue color. The breakout level of the triangle generally acts a good support level.
The stock is also currently trading above all its major moving averages in the daily chart, indicating that the trend is up.
#4 Consolidation and Breakouts: The weekly chart of HI shows that the stock has historically moved higher after a brief period of consolidation.
This is marked as green rectangles in the weekly chart below. Currently, the stock has broken out of a recent consolidation phase, indicating a possible upmove in the near term.
#5 Uptrend unbroken: As you can see from the weekly chart, the stock has been on an uptrend for the past few months. The stock has been making higher highs and higher lows indicating an uptrend. This uptrend is still unbroken. The stock is also trading above its 50-week and 200-week SMA, indicating bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level is if the stock corrects back to the flag/ ascending triangle breakout level of $46.
However, if you want a speedy entry and have a higher risk appetite, you can purchase half the intended quantity of shares at the current price of $46.90 and follow strict stop loss.
TP: Our first target price is $50 and the second target price is $55.
SL: To limit risk, place a stop loss at $44.60. Note that the stop loss is on a closing basis.
Our target potential upside is almost 9% to 20% in the next 3-5 months.
- Entry at $46: For a risk of $1.4, our target rewards are $4.00 and $9.00. This is a 1:3 and 1:6 risk-reward trade.
- Entry at $46.90: For a risk of $2.30, our target reward (TP#2) is $8.10. This is a 1:3.5 risk-reward trade.
In other words, this trade offers nearly 3X to 6x 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 line. 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.