The manufacturer of fruit spreads, ice cream toppings, beverages, shortening, peanut butter, oils, and other products in North America, J M Smucker Co (NYSE: SJM) seems to be ready for an upmove in the near term as per its latest charts.
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern during the past few months. This is marked in purple color in the daily chart. A falling wedge is a bullish pattern. Once the stock breaks out of the top of the pattern, it may move higher in the near-term. Currently, the stock has broken out of the falling wedge pattern, indicating bullishness.
#2 Bullish RSI: The daily chart shows that the RSI is currently above 50. This indicates strength.[hana-code-insert name=’adsense-article’ /]#3 Double Bottom: A double bottom has been formed in the daily chart.
This is marked in orange color on the chart.
Once a stock breaks out of a bullish pattern like a double bottom, it usually moves higher.
Currently, the stock has broken out of the double bottom pattern, indicating bullishness.
#4 Bullish ADX and DI: The ADX indicator in the daily chart shows bullishness because (+DI) is greater than (-DI), and ADX and (+DI) are above (-DI).
#5 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
#6 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#7 Broken Downtrend: The weekly chart shows that the stock has broken out of a short-term downtrend. This downtrend line has been marked as a purple color line.
#8 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart, indicating bullishness. The stochastic was also rising up from below 20, which is yet another bullish sign.
#9 Bullish RSI: The RSI in the weekly chart is currently moving up above 50, indicating possible bullishness in the near-term.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level is if the price of SJM corrects to the breakout level of the double bottom pattern at around $111. You can also buy the stock if it corrects to the breakout level of the falling wedge pattern at around $105.
TP: Our target prices are $125 and $140 in the next 4-6 months.
SL: To limit risk, place a stop loss at $107.70 (for entry at $111) and $101.80 (for entry at $105). Note that this stop loss is on a closing basis.
Our target potential upside is 12% to 33% in the next 4-6 months.
- Entry at $105: For a risk of $3.20, our target rewards are $20.00 and $35.00. This is a nearly 1:6 and 1:11 risk-reward trade.
- Entry at $111: For a risk of $3.30, our target rewards are $14.00 and $29.00. This is a nearly 1:4 and 1:9 risk-reward trade.
In other words, this trade offers nearly 4x to 11x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling edge 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 its sector.
Tara[hana-code-insert name=’MMPress 2′ /]