The American designer, manufacturer and marketer of high-end tools and equipment for professional use in the transportation industry including the automotive, heavy duty, equipment, marine, aviation, and railroad industries, Snap-on Incorporated (NYSE: SNA) seem to be poised for a price surge as per its latest charts.
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
#2 Strong RSI: The daily chart shows that RSI is above 50 and moving up, indicating strength.
#3 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This is a bullish sign.
[hana-code-insert name=’adsense-article’ /]#4 MACD above Signal Line: The daily chart of SNA shows that the MACD (light blue color) is currently above the MACD signal line (orange color).
This typically indicates a bullish setup.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates bullishness.
#6 Above Gap Support: As shown in the daily chart, there is a gap support nearby for the stock, which is marked as a pink dotted line.
The stock is currently trading above this gap support. This area typically acts as a good support level.
#7 CCI-Price Bullish Divergence: There is a bullish divergence between CCI and price in the weekly chart. While the price formed a lower low, the CCI formed to a higher low. This is marked as blue dotted lines in the weekly chart. This is a bullish sign.
#8 Bullish CCI: The CCI is currently moving up from oversold levels. This indicates that the price may move higher.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of SNA at the current price of $162.13 and the rest once the stock break out above the gap resistance level of $167.
TP: Our target prices are $180 and $190 in the next 4-6 months.
SL: To limit risk, place stop-loss at $155.70 (for entry near $162.13) and $163 (for entry near $167). Note that the stop-loss is on a closing basis.
Our target potential upside is 8% to 17% in the next 4 to 6 months.
- Entry at $162.13: For a risk of $6.43, our target rewards are $17.87 and $27.87. This is a 1:3 and 1:4 risk-reward trade.
- Entry at $167: For a risk of $4.00, our target rewards are $13.00 and $23.00. This is a 1:3 and 1:6 risk-reward trade.
In other words, this trade offers nearly 3x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level with a 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 the sector.
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