The designer and manufacturer of a range of power generation equipment and other engine powered products, Generac Holdings Inc. (NYSE: GNRC) seems to be getting ready for a surge in its price as per the latest charts.
Bullish Move – Chart Indications
#1 Channel Breakout: As you can see from the daily chart of GNRC, the stock has currently broken out of a channel. This channel is marked on the chart in purple color. This seems like a bullish indication.
Daily Chart – GNRC
#2 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 as a potential buy signal.
[hana-code-insert name=’adsense-article’ /] #3 Bullish Stoch: The %K line is above the %D line of the stochastic and it has moved from oversold, indicating possible bullishness.#4 Above MAs: The stock is currently trading above both 50-day as well as 200-day SMA.
This means that the bulls are currently in control.
#5 Alligator Awake: William’s Alligator is currently awake 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.
#6 Uptrend Unbroken: The stock’s uptrend is still unbroken as the stock has been making higher highs and higher lows. The parabolic SAR indicator is also currently below the price, indicating that the uptrend is still strong.
Weekly Chart – GNRC
#7 Possible Bullish Gap: The latest weekly candle shows that the stock had started the week with an upward gap. This is a possible bullish sign.
#8 Bullish Stochastic: The stochastic is moving up from oversold levels. The %K is also above %D. All these indicate possible bullishness.
#9 Bullish MACD: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GNRC is in two scenarios
- If the stock breaks out of the long-term resistance level of around $62-$63.
- If the stock corrects to the breakout level of the channel at around $55-$56.
TP: Our target prices are $68 and $75 in the next 3-5 months.
SL: To limit risk, place a stop loss below $52.50 (entry at $56) and $59.80 (entry at $63). Note that the stop loss is on a closing basis.
Our target potential upside is 8% to 34% in the next 3-5 months.
- Entry at $56: For a risk of $3.50, our first target reward is $12 and second target reward is $19. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry at $63: For a risk of $3.20, our target rewards are $5 and $12. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel support 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.
Happy Trading!
Tara
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