Parsippany, New Jersey-based packaged foods company that specializes in the shelf stable and frozen food categories, PINNACLE FOODS INC Common Stock (NYSE: PF) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Double Bottom: The daily chart of PF shows that the stock is currently forming the second bottom of the double bottom pattern. This is marked in the chart in purple color. A Double bottom pattern is a bullish reversal pattern, indicating that the stock could possibly move upwards shortly.
Daily Chart – PF
#2 Doji: The latest candle on the daily chart of PF is a Doji, which implies indecisiveness between buyers and sellers.
[hana-code-insert name=’adsense-article’ /]#3 RSI nearing Oversold: In the daily chart, the RSI is nearing oversold levels.
This implies that a possible reversal is around the corner.
#4 Negative CCI: The weekly chart of PF shows that the readings of CCI is near -100.
This means that the indicator is near oversold levels and can potentially start an uptrend.
Weekly Chart – PF
#5 Unbroken Uptrend in Weekly Chart: As evident from the weekly chart, the stock is in an uptrend as it has been making higher highs and higher lows for the past several weeks. The RSI is also near the oversold level, further indicating that the stock price may reverse to the upside.
#6 Support near 50% Fibonacci retracement level: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. PF had taken support at 50% Fibonacci support level as seen in the weekly chart. Currently, the stock is nearing the 50% retracement level again, which is a good support level.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the shares of PF at the current price of $55.03. The remaining shares can be purchased in either of these scenarios
- If the stock corrects back to the bottom of the double bottom pattern, at around $53. (or)
- If the stock breaks out of the double bottom pattern, at around $62.
TP: Our first target price (TP#1) is $75 in the next 4 months and the second target price (TP#2) is $80 in the next 6 months.
SL: To limit risk, place stop loss at $52.50. Note that stop loss is on a closing basis.
Our target potential upside is 21% to 51% in the next 4-6 months.
- Entry at $55.03: For a risk of $2.53, our target rewards are $19.97 and $24.97. This is a 1:8 and 1:10 risk-reward trade.
- Entry at $53: For a risk of $0.50, our target rewards are $22 and $27. This is a 1:44 and 1:54 risk-reward trade.
- Entry at $62: For a risk of $9.5, our target reward (TP#2) is $18. This is a 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 54x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the double bottom pattern with a 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 the sector.
Happy Trading!
Tara
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