The American Fortune 500 company and counts among the largest manufacturers of medium- and heavy-duty commercial vehicles in the world, PACCAR Inc. (NASDAQ: PCAR) seems to be ready for an upmove in the near term as per its latest charts.
Bullish Indications
#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 in purple color in the daily chart. The stock is currently near the bottom of this falling wedge pattern. If the stock breaks out of the top of the falling wedge pattern, it can move higher in the near-term.
Daily Chart – PCAR
#2 Doji: The latest candlestick is a Doji, indicating indecision among sellers and buyers. The price may start to move higher in the near-term.
[hana-code-insert name=’adsense-article’ /] #3 Oversold RSI: The daily chart shows that the RSI is currently oversold and is moving upwards. This is a bullish sign.#4 CCI moving up: The CCI is now moving up from below -100. This indicates possible bullishness.
#5 Oversold %R: William’s %R value is currently moving up from below -80. This indicates that a possible reversal may be imminent.
#6 Double Bottom: A double bottom is currently being formed in the daily chart and is marked in orange color.
The double bottom is also being formed near a long-term support level (marked as a green dotted line). Once the stock breaks out of this bullish pattern, it may move higher.
#7 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. PCAR has currently taken support at the 50% Fibonacci support level of the upmove, as seen in the weekly chart.
Weekly Chart – PCAR
This is a good demand area. It is also near the 200-week SMA. So, this seems like a good point to bounce back from.
#7 Oversold RSI: The RSI in the weekly chart is currently oversold, indicating possible upmove in the near-term.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy half the intended quantity of shares at the current price of $62.11. The rest can be purchased if the stock corrects to the long-term support level of around $60.
TP: Our target prices are $70 and $80 in the next 3-6 months.
SL: To limit risk, place a stop loss at $58.50. Note that this stop loss is on a closing basis.
Our target potential upside is 12% to 33% in the next 3-6 months.
- Entry at $60: For a risk of $1.50, our target rewards are $10 and $20. This is a nearly 1:7 and 1:13 risk-reward trade.
- Entry at $62.11: For a risk of $3.61, our target rewards are $7.89 and $17.89. This is a 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 13x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling edge pattern and long-term support level 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.
Happy Trading!
Tara
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