The American worldwide supplier of drivetrain, sealing, and thermal-management technologies, Dana Inc. (NYSE: DAN) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Support: As you can see from the daily chart of DAN, the stock has been forming a falling wedge pattern for the past several weeks. DAN has typically taken support at the bottom of the wedge before bouncing back. The stock is currently at the lower end of the wedge after a previous bullish move to the upper end of the wedge, indicating that it is getting ready for its next upmove. This is a bullish sign.
#2 RSI Near Oversold Levels: Relative strength index (RSI) is said to be oversold when it is near 30 and overbought when it is near 70.[hana-code-insert name=’adsense-article’ /] Presently, the 14-day RSI reading for DAN is near 23.
This indicates that the stock is near oversold levels and a possible reversal of the downtrend is imminent.
#3 Hammer: The latest candle in daily chart is a hammer, indicating possible bullishness and reversal from the current downtrend.
#4 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again.
DAN has taken support at the 38.2% Fibonacci support level of the upmove, as seen in the weekly chart. This seems like a good point to bounce back from.
#5 Near Support Level: The stock’s weekly chart shows that the price is currently near the breakout level from a demand area. This breakout level is marked by a green dotted line and the demand area is marked as an orange rectangle. This indicates that the stock may reverse from current level soon. The stock is also currently trading above its 200-week SMA, indicating that the bulls are still in control.
#6 Uptrend Unbroken: The weekly chart of DAN shows that the uptrend is still unbroken, as the stock is making higher highs and higher lows.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, purchase shares of DAN at the current price of $20.30.
TP: Our target prices are $25 and $35 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $19.20. Note that the stop loss is on a closing basis.
Our target potential upside 23% to 72% in the next 3-6 months.
For a risk of $1.10, our first target reward is $4.70 and second target reward is $14.70. In other words, this trade offers 4x to 13x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern 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 the sector.
Tara[hana-code-insert name=’MMPress’ /]