The well-known industrial valve manufacturing company, Sun Hydraulics Corporation (NASDAQ: SNHY) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart of SNHY shows that the stock was trading within a falling wedge pattern during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of this falling wedge pattern. A breakout from a bullish pattern like Falling Wedge Pattern shows that the stock has gained momentum and has the potential to move further up.
Daily Chart – SNHY
#2 CCI above 100: The CCI is above 100, indicating bullishness. There is a CCI-Price positive divergence on the daily chart. The CCI made a higher low while the price made a lower low. This is marked on the chart as orange dotted lines. This indicates that the selling pressure is reducing and the stock may move higher.
[hana-code-insert name=’adsense-article’ /]#3 %K above %D Line: As you can see from the daily chart, the %K line of the stochastic is currently above the %D line.
The MACD line is also above the signal line.
All these show a possible bullish bias.
#4 Strong RSI: The RSI is currently above 50 and moving up. This shows bullishness.
#5 Support near 50% Fibonacci Level: The weekly chart shows that the stock was on an uptrend from November 2016 and formed a top in January 2018.
Since then, the stock has been correcting. It is now near the 50% Fibonacci retracement level of this move. Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before resuming its upmove. So, this 50% retracement level seems like a good support area.
Weekly Chart – SNHY
#6 RSI moving up: The RSI was oversold and is now moving upwards in the weekly chart, indicating a bullish bias.
#7 CCI moving up: The CCI is moving up from -100, indicating bullishness.
#8 Strong Stochastic: The %K line is above %D line in stochastic. This points to possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy the stock at the current price of $50.86.
TP: Our target prices are $62 and $70 in the next 4-6 months based on the falling wedge pattern breakout.
SL: To limit risk, place a stop-loss at $44.80. Note that this stop loss is on a closing basis.
Our target potential upside is almost 22% to 38% in the next 4-6 months.
For a risk of $6.06, our target rewards are $11.14 and $19.14. This is a nearly 1:2 and 1:3 risk-reward trade. In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge pattern 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 the sector.
Happy Trading!
Tara
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