This Stock Could Break Out in the Near-Term

The multinational conglomerate headquartered in Cork, Ireland, that produces automotive parts such as batteries, and electronics and HVAC equipment for buildings, Johnson Controls International PLC (NYSE: JCI) shows signs of an upcoming price surge according to its latest charts.

Bullish Indications

#1 Falling Wedge Pattern: The daily chart of JCI shows that the stock has been trading within a falling wedge pattern during the past few months. This is marked in the chart in purple color. Currently, the stock is near the bottom rail of the falling wedge pattern. Once the stock breaks out from the top rail of the Falling Wedge Pattern, it has the potential to move further up.

Daily Chart – JCI

#2 Double Bottom Pattern: Within the falling wedge pattern, the stock is currently forming a double bottom pattern. This is marked in the daily chart in orange color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards.

[hana-code-insert name=’adsense-article’ /]#3 Oversold RSI: RSI is currently near oversold levels, indicating the possibility of a bullish reversal in the near-term.

#4 Oversold CCI: The daily chart shows that the CCI is currently moving up after reaching oversold levels.

This is a possible bullish sign.

#5 RSI – Price bullish divergence: There is a bullish divergence between RSI and price as seen in the weekly chart below.

While the price formed a lower low, the RSI formed a higher low.

This is marked as purple dotted lines in the weekly chart. The RSI is also near oversold levels. These are all possible bullish signs.

Weekly Chart – JCI

Recommended Trade (based on the charts)

Buy Price: If you want to get in on this trade, the ideal buy price for the stock is above the double bottom breakout level at around $35.20. For those with a higher risk appetite, you can purchase half the intended quantity of the stock at the current price of $30.49.

TP: Our target prices are $40 and $45 in the next 3 to 6 months.

SL: To limit risk, place a stop loss below $32.80 (for entry near $35.20) and $28.70 (for entry near $30.49). Note that this stop loss is on a closing basis.

Our target potential upside is almost 13% to 48% in the next 3-6 months.

  • Entry at $30.49: For a risk of $1.79, our first target reward is $9.51 and the second target reward is $14.51. This is a nearly 1:5 and 1:8 risk-reward trade.
  • Entry at $35.20: For a risk of $2.40, our first target reward is $4.80 and the second target reward is $9.80. 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 falling wedge 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!


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