The Milwaukee, Wisconsin-based manufacturer of products for identifying components used in workplaces, Brady Corp (NYSE: BRC) shows signs of an upcoming price surge according to its latest charts.
#1 Symmetrical Triangle Pattern Breakout: As you can see from the daily chart, BRC had recently formed a symmetrical triangle pattern.
This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers.
Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend.
Currently, the stock has broken out of the symmetrical triangle pattern, indicating bullishness.
#2 MACD above Signal Line: The MACD line (blue color) is currently above the signal line (orange color) in the daily chart, indicating a bullish bias.
#3 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#4 Bullish RSI: The RSI is currently above 50 and moving up, indicating bullishness.
#5 %K above %D in Stochastics: The stochastics oscillator shows that the %K (blue) line is currently above the %D (orange) line in the weekly chart. This indicates possible bullishness.
#6 Support Near IH&S breakout level: The stock had recently broken out of an Inverted Head and Shoulders (IH&S) pattern. This pattern is marked in orange color in the weekly chart. The stock is currently near the breakout level of the IH&S pattern. This is a good support level and is marked as a pink dotted line. This seems like a good area for the stock to bounce back upwards.
#7 MACD above Signal Line: The MACD line (blue color) is currently above the signal line (orange color) in the weekly chart as well, indicating possible bullishness.
#8 Bullish RSI: As you can see from the weekly chart, RSI is currently above 50 and moving up, indicating bullishness. The stock is also trading above its 50-week and 200-week SMA, indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of BRC at the current price of $44.24.
TP: Our target prices are $50 and $60 in the next 4-6 months.
SL: To limit risk, place a stop loss at $41.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 13% to 36% in the next 4-6 months. For a risk of $2.74, our target rewards are $5.76 and $15.76. This is an almost 1:2 and 1:6 risk-reward trade.
In other words, this trade offers nearly 2x to 6x 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.