Popular American tax preparation company, H & R Block Inc. (NYSE: HRB) seems to be gearing up for a surge as per its latest charts.
#1 MA Cross: The short-term moving average of 50-day SMA has currently crossed above the longer-term moving average of 200-day SMA. The price is also above both MAs. This implies that the bulls are currently in control.
#2 Ascending triangle pattern: HRB’s daily chart shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The base of the triangle generally acts as a good support level.
[hana-code-insert name=’adsense-article’ /]#3 Strong Stochastic: As you can see from the daily chart, the %K line (blue color) is currently above the %D line (orange color), indicating a bullish bias.
#4 Alligator Awake: William’s Alligator has currently woken up in an upward direction (green line above the red line and blue line) and candles have formed above the three lines.
This indicates a possible bullish bias.
#5 Strong RSI: RSI is currently above 50 and moving up, indicating bullishness.
#6 IH&S Pattern: As seen from the daily chart, there is an IH&S pattern being formed.
This is marked in orange color. A breakout from this bullish pattern could result in a possible surge in price.
#7 Breakout after consolidation: The weekly chart shows that the stock was consolidating within a range (marked as a blue rectangle) before breaking out of it. Then the stock corrected to the breakout level (marked as blue dotted line) again before starting the current upmove. This seems like a possible bullish setup.
#8 Bullish bias: There are various bullish signs as per indicators in the weekly chart. The stock’s parabolic SAR indicator is currently below the price. The MACD indicator shows that the MACD line is above the signal line. The RSI is strong and moving up. The stochastic shows that %K is above %D. All these indicate that the bulls are currently in control.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of HRB if the stock breaks out of the ascending triangle pattern. This translates to a daily close above $28.50.
TP: Our target prices are based on the Ascending Triangle pattern. The first target price is $35 and the second target price is $42.
SL: To limit risk, place a stop loss at $27.40. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 23% to 47% in the next 4-6 months. For a risk of $1.10, the target rewards are $6.50 and $13.50. This is a nearly 1:6 and 1:12 risk-reward trade.
In other words, this trade offers nearly 6X to 12X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle breakout level. 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=’MMPress 2′ /]