Global industrial and aerospace manufacturer and service provider, serving a wide range of end markets and customers, Barnes Group Inc. (NYSE: B) seems to be ready for an upmove in the next 4-6 months as per its latest charts.
#1 Falling Wedge Pattern: The daily chart shows that the stock has been forming a falling wedge pattern during the past few weeks. This is marked as orange color in the daily chart. There is also a smaller falling wedge pattern within it (marked as a pink line). The stock had taken support near the bottom of this falling wedge pattern and is now moving upwards. The price can potentially reach the top of the falling wedge and breakout of the pattern in the near term.
#2 MACD Cross: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
[hana-code-insert name=’adsense-article’ /]#3 RSI Moving up: The daily chart shows that the RSI is near 50 and moving upwards. This indicates bullishness.
#4 Pennant Pattern: The weekly chart shows that the stock was in a strong uptrend for the past several months.
Then the stock started consolidating and was in a narrowing range.
This is a classic pennant pattern, which is marked in pink color. A pennant is a continuation pattern, and whenever a stock breaks out of this pattern, it typically continues its previous trend which is an uptrend in this case.
#5 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. Barnes Group Inc. had taken support at 61.8% Fibonacci support level of the upmove from $31.13 to $72.86, as seen in the weekly chart. The stock is also currently trading above its 200-week SMA, indicating that the bulls are still in control.
#6 Strong RSI: The RSI is currently above 40 and moving up in the weekly chart, indicating strength.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of Barnes Group Inc. in any of the three scenarios.
- If the stock corrects back to the lower end of the wedge, at around $57.50.
- If the stock breaks out above the top of the wedge, at around $63.50.
- If the stock breaks out above the long-term resistance level (marked as a green dotted line in the daily chart), at around $61.50.
These 3 buy levels are marked in the daily chart above.
TP: Our target prices are $75 and $85.
SL: To limit risk, place a stop loss at $55.50. Note that this stop loss is on a closing basis.
Our target potential upside is 21% to 48% in the next 4-6 months.
- Entry at $57.50: For a risk of $2.00, our target rewards are $17.50 and $27.50. This is 1:9 and 1:14 risk-reward trade.
- Entry at $61.50: For a risk of $6.00, our target rewards are $13.50 and $23.50. This is 1:2 and 1:4 risk-reward trade.
- Entry at $63.50: For a risk of $8, our target reward (TP#2) is $21.50. This is 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 14x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel support 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.
Tara[hana-code-insert name=’Jerremy-trading-room’ /]