The Missouri-based developer and producer of chemicals and biofuels, FutureFuel Corp. (NYSE: FF) shows signs of an upcoming price surge according to its latest charts.
#1 Channel Breakout: The daily chart of FF shows that the stock was trading within an uptrend channel for the past 6 months. This channel is marked in the daily chart in purple color. There were some unsuccessful attempts done to break out of the channel during these months. Currently, the stock has broken out of the channel. This shows that the stock has gained momentum and has the potential to move further up. There was also good volume during the breakout, indicating that the breakout could sustain this time around.
#2 Bullish Candlestick: The latest candle in the daily chart was a bullish candle and was formed with good volume.[hana-code-insert name=’adsense-article’ /] #3 Above MAs: The stock is currently trading above both its 50-day as well as 200-day SMA.
This indicates overall bullishness of the stock.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and ADX and (+DI) are above (-DI).
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30.
This indicates bullishness.
#6 Strong uptrend: The weekly chart of FF shows that the stock is currently in an uptrend as it has been making higher highs and higher lows. The stock is also trading above both 50-week as well as 200-week SMA, indicating that the bulls are currently in control.
#7 Above Resistance Level: The stock has currently crossed above an important resistance level (marked as a light blue dotted line). This would generally act as a good support level from now on.
#8 MACD above Signal Line: In the daily as well as the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Note: Even though the stock has broken out of the channel and could move further up, there is also a risk that the stock might correct. This is because it has been on a steep uptrend recently. In addition, there is a bearish divergence (marked as blue dotted lines) in the weekly chart between Stochastic and price. So, make sure to strictly follow the entry level as well as the stop-loss level when you enter this trade.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase shares of FF if it corrects to a range of $16 to $16.50.
TP: Our target prices are $25 and $30.
SL: To limit risk, place a stop loss around $14.20. Note that this stop loss is on a closing basis.
Our target potential upside is almost 56% to 88% in the next 4-6 months. When entering near $16, for a risk of $1.80, our target rewards are $9 and $14. This is a nearly 1:5 and 1:8 risk-reward trade.
In other words, this trade offers nearly 5x to 8x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the channel 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.
Tara[hana-code-insert name=’MMPress’ /]