The American car rental company based in Estero, Florida that operates 10,200 corporate and franchisee locations internationally, and a subsidiary of Hertz Global Holdings Inc., Herc Holdings Inc. (NYSE: HRI) seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 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 usually indicates a possible bullish bias for the stock.
Daily Chart – HRI
#2 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has recently formed a Symmetrical Triangle pattern.
[hana-code-insert name=’adsense-article’ /]This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs.This pattern is marked on the daily chart as purple lines.
The breakout from a symmetrical triangle pattern usually signifies a bullish move.
Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color).
This is a possible bullish setup.
#4 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 possible bullishness.
#5 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines. The +DI line is also currently above –DI line. This is a possible bullish setup.
#6 IH&S Pattern: As you can see from the weekly chart, over the past few weeks, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern. This is marked in orange color. An IH&S pattern is a strong bullish pattern. After the breakout from this IH&S pattern, the stock may move higher in the short term. The stock is also trading above its 50-week SMA, indicating that the bulls are currently in control.
Weekly Chart – HRI
#7 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#8 MACD above Signal Line: The MACD line (blue color) is currently above the MACD signal line (orange color) in the weekly chart as well. This is also a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy price for HRI is above the breakout level of the IH&S pattern at around $48.60.
Note: For those with higher risk appetite, you can purchase half the intended quantity of shares of HRI at the current price of $46.26.
TP: Our target prices are $55 and $60 in the next 3-6 months.
SL: To limit risk, place a stop loss at $40.70. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 19% to 30% in the next 3-6 months. For a risk of $5.56, the target rewards are $8.74 and $13.74. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle 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 its sector.
Happy Trading!
Tara
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