The American industrial conglomerate that designs, develops, manufactures, and markets engineered industrial products worldwide, EnPro Industries, Inc. (NYSE: NPO) seems to be poised for a price surge according to its charts.
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily charts shows that a symmetrical triangle pattern has been formed for the stock. This is marked in pink color. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is an indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern. This is a bullish sign.
Daily Chart – NPO
#2 Channel: As you can see from the daily chart, the stock has been trading within a channel during the past few weeks. This is marked in the daily chart in purple color. Currently, the stock is near the top end of the channel. A breakout from the channel could cause the stock to move higher.
[hana-code-insert name=’adsense-article’ /] #3 Bullish RSI: The RSI is moving up after reaching oversold levels, indicating that the price may move higher soon.#4 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#5 Bullish CCI: In the daily chart, CCI is moving up from below -100. This is a bullish sign.
#6 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again.
NPO has taken support at the 50% Fibonacci support level of the upmove, as seen in the weekly chart. Currently, the stock is near the 61.8% Fibonacci level of the move, which acts as a good support area.
Weekly Chart – NPO
#7 Near Consolidation area: The weekly chart shows that the stock had consolidated for a while (marked as a green rectangle) before the upmove. The stock has now reached near the breakout level of this consolidation area. This indicates a possible upmove in the near-term.
#8 Bullish indicators: The RSI, Stochastic, MACD, and CCI indicators are all bullish and point to a possible upmove.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy half the intended quantity of the stock at the current price and symmetrical triangle breakout level of $75.10 and the rest after the breakout from the 200-day SMA at around $80.
Note: If the stock corrects a little from the current price, $70 is also another good support level from which you can buy the stock.
TP: Our first prices are $95 and $105 in the next 4-6 months.
SL: To limit risk, place a stop loss at $71.40 (for entry above $75) and $69.40 (entry at $70). Note that this stop loss is on a closing basis.
Our target potential upside is almost 18% to 50% in the next 4-6 months.
- Entry at $70: For a risk of $0.60, our target rewards are $25 and $25. This is a 1:42 and 1:58 risk-reward trade.
- Entry at $75.10: For a risk of $3.70, our target rewards are $19.90 and $29.90. This is a 1:5 and 1:8 risk-reward trade.
- Entry at $80: For a risk of $8.60, our target rewards are $15 and $25. This is a 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 58x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the uptrend channel. 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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