The well-known distributor of health care products and services with a presence in 34 countries, Henry Schein, Inc. (NASDAQ: HSIC) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart of HSIC shows that the stock was trading within a falling wedge pattern during the past few months. This pattern is marked in the daily chart in purple color. The stock has currently broken out from it. Once the stock moves breaks out from a bullish pattern like the Falling Wedge Pattern, it has the potential to move further up.
#2 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating bullishness.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color).
This is a possible bullish setup.
#4 Bullish RSI: The RSI is above 50 and moving up, indicating possible bullishness.
#5 Flag Pattern: 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). Currently, the stock is trading near the upper rail of the flag pattern and appears to be ready for a breakout.
#6 Bullish RSI: The RSI is above 50 and moving up in the weekly chart as well. This indicates possible bullishness.
#7 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the weekly chart. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal entry level for HSIC is above the resistance level of $64.20. But for those with a higher risk appetite, you can purchase half the intended quantity of shares if the stock crosses above its 200-day SMA. This translates to a price of around $62.35.
TP: Our target prices are $70 and $80 in the next 4 to 6 months.
SL: To limit risk, place a stop loss below $61. Note that this stop loss is on a closing basis.
Our target potential upside is almost 9% to 28% in the next 4-6 months.
- Entry at $62.35: For a risk of $1.35, our first target reward is $7.65 and the second target reward is $17.65. This is a 1:6 and 1:13 risk-reward trade.
- Entry at $64.20: For a risk of $3.20, our first target reward is $5.80 and the second target reward is $15.80. This is a 1:2 and 1:5 risk-reward trade.
Overall, this trade offers nearly 2x to 13x more potential upside than downside.
Risks to ConsiderThe 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!
Tara Young
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