The American medical technology company that manufactures and sells medical devices, instrument systems, and reagents, Becton Dickinson and Co (NYSE: BDX) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Rising Wedge Pattern Breakdown: The daily chart shows that BDX has recently broken down from a rising wedge pattern that was formed during the past few months. This is a bearish pattern and is marked in purple color in the daily chart. Once a stock breaks down from the bottom of the rising wedge pattern, it typically moves lower in the near-term.
Daily Chart – BDX
#2 Price below MAs: The stock price is currently below both 50-day as well as 200-day SMA. This is a possible bearish sign.
[hana-code-insert name=’adsense-article’ /]#3 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#4 %K below %D in Stochastic: The %K line is currently below the %D line in stochastic of the daily chart.
This indicates possible bearishness.
#5 Bearish ADX and DI: The ADX and DI indicate bearishness.
This is because (+DI) < (-DI); ADX and (-DI) are above (+DI); and ADX has started rising from below both (+DI) and (-DI).
All these points to possible bearishness.
#6 Head and Shoulders Pattern: There is a head and shoulders pattern being currently formed on the weekly chart of BDX. This is marked in orange color. A head and shoulders pattern is a bearish pattern and a breakdown from it usually indicates that the stock may move lower.
Weekly Chart – BDX
#7 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color) in the weekly chart, indicating bearishness.
#8 Overbought Stochastic: The stochastic in the weekly chart is also near overbought levels and moving down. The %K line has also crossed below the %D line. All these indicate possible bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on half the intended quantity of stocks at the current price of $225.87. The rest of the stock can be purchased if it bounces back to the resistance level of $240.
TP: Our target prices are $210 and $200 in the next 3-6 months.
SL: To limit risk, place a stop loss at $232 (for entry near $225.87) and $249 (for entry near $240). Note that this stop loss is on a closing basis.
Our target potential downside is 7% to 17% in the next 3-6 months.
- Entry at $225.87: For a risk of $6.13, our target rewards are $15.87 and $25.87. This is a nearly 1:3 and 1:4 risk-reward trade.
- Entry at $240: For a risk of $9.00, our target rewards are $30.00 and $40.00. This is a nearly 1:3 and 1:4 risk-reward trade.
In other words, this trade offers nearly 3x to 4x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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