The New York-based company that supplies an array of components for the original equipment manufacturers (OEMs) of recreational vehicles (RVs) and adjacent industries, LCI Industries (NYSE: LCI) seem to be poised for a price surge as per its latest charts.
#1 Channel: As you can see from the daily chart, the stock has been trading within a channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock is near the top rail of the channel, looking poised for a breakout. A breakout from a channel typically indicates that the stock has the potential to move further up.
#2 IH&S Pattern: The stock’s daily chart shows that the stock has been forming an Inverted Head and Shoulders pattern. This is marked in the chart in orange color. An inverted head and shoulders pattern is a bullish pattern. A breakout from this pattern is a possible sign of an upcoming bullish move.
This is a possible bullish sign.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart.
This indicates possible bullishness.
#5 Bullish RSI: In the daily chart, the RSI is above 50 and moving up, indicating bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks typically retraces to any of the key Fibonacci levels before surging back again.
LCII had taken support at the 23.6% Fibonacci support level as seen in the weekly chart. So, this seems like a good area for the stock to bounce upwards.
#7 MACD above Signal Line: The weekly chart shows that the MACD line (blue color) is currently above the signal line (orange color). This is a possible bullish setup.
#8 Oversold RSI moving up: In the weekly chart, we can see that the RSI has moved above 50 from oversold levels and is currently moving up, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for LCII is above the resistance level of $85. This is also the breakout level of the IH&S pattern.
TP: Our target prices are $95 and $105 in the next 4-6 months.
SL: To limit risk, place stop-loss at $82.40. Note that the stop-loss is on a closing basis.
Our target potential upside is 12% to 24% is in the next 4 to 6 months. For a risk of $2.60, our target rewards are $10.00 and $20.00. This is a nearly 1:4 and 1:8 risk-reward trade.
In other words, this trade offers nearly 4x to 8x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel 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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