One of the largest American-owned companies in the spirits and wine business, Brown-Forman Corporation Class B (NYSE: BF.B) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
Daily Chart – BF.B
#2 MACD Above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.
[hana-code-insert name=’adsense-article’ /]#3 Strong RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#4 Above MA: In the daily chart of BF-B, the stock is currently trading above 50-day SMA.
This implies that the bulls are currently in control.
#5 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#6 Flag Pattern Breakout: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern and is marked in the chart in purple color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case).
Weekly Chart – BF.B
#7 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line. This is a possible bullish indication.
#8 Oversold RSI moving up: The RSI in the weekly chart is currently moving up from oversold levels and is now near 50. This indicates possible bullishness in the near-term.
#9 MACD above Signal Line: The weekly chart also shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for BFB is at the current price of $47.55.
TP: Our target prices are $55 and $60 in the next 4-6 months.
SL: To limit risk, place stop-loss at $44.40. Note that the stop loss is on a closing basis.
Our target potential upside is 16% to 26% in the next 4-6 months. For a risk of $3.15, our target rewards are $7.45 and $12.45. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern 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.
Happy Trading!
Tara
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