This Stock Just Broke Out– Buy At These Levels

The Southeastern United States regional chain of fast food restaurants, Bojangles Inc. (NASDAQ: BOJA) seem poised for a price surge according to its latest charts.

Bullish Indications

#1 Symmetrical Triangle Pattern Breakout: As seen in the daily chart of BOJA, a symmetrical triangle pattern has been formed during the past few months. This pattern represents a period of consolidation before the price breaks out. A symmetrical triangle pattern 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 of the pattern occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, indicating bullishness.

Daily Chart – BOJA

#2 Above MAs: The stock price is currently above both 50-day and 200-day SMA. This is a bullish sign.

[hana-code-insert name=’adsense-article’ /] #3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI).

#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color).

This indicates a possible bullish setup.

#5 Bullish Stochastic: The %K line is above the %D line of the stochastic in the daily chart, indicating bullishness.

#6 Downtrend Broken: The weekly chart of shows that the short-term downtrend of BOJA has been broken (marked as a purple line) and the stock is poised for an upmove. The price is also currently above the 50-week SMA, indicating bullishness.

Weekly Chart – BOJA

#7 Bullish CCI: In the weekly chart, the CCI is currently above 100 and moving up from below -100. This is a possible bullish sign.

#8 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color), indicating bullishness.

#9 Strong RSI: The RSI is above 50 and moving up, indicating strength.

#10 Double Bottom Breakout: The weekly chart shows that the stock has broken out of a double bottom pattern. This is marked in orange color. This is also a bullish sign.

Recommended Trade (based on the charts)

Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of shares of BOJA at the current price of $15.70. The rest can be purchased if the stock corrects back to the breakout level of the symmetrical triangle pattern at around $14.50.

TP: Our target prices are $22 and $28 in the next 4-6 months.

SL: To limit risk, place a stop loss at $12.80. Note that this stop loss is on a closing basis.

Our target potential upside is 40% to 93% in the next 4-6 months.

  • Entry at $14.50: For a risk of $1.70, our target rewards are $7.50 and $13.50. This is a nearly 1:4 and 1:8 risk-reward trade.
  • Entry at $15.70: For a risk of $2.90, our target rewards are $6.30 and $12.30. This is a nearly 1:2 and 1:4 risk-reward trade.

In other words, this trade offers nearly 2x 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 symmetrical triangle pattern. 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!


[hana-code-insert name=’oxford 1′ /]