The American holding company headquartered in San Antonio, Texas whose subsidiaries include Steak ‘n Shake, Maxim magazine, First Guard Insurance and Western Sizzlin’, Biglari Holdings Inc. Class B (NYSE: BH) seems to be gearing up for a surge as per its latest charts.
#1 Ascending triangle pattern breakout: BH’s daily chart shows that the stock has currently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level.
#2 Trading Above MAs: The stock is currently trading above its 50-day SMA, which implies that the bulls are currently gaining control.
[hana-code-insert name=’adsense-article’ /]#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a bullish bias.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI).
#6 Downtrend Broken: The weekly chart shows that the stock has broken out of a short-term downtrend. This downtrend line is marked in pink color in the weekly chart below. A break out from downtrend is usually a bullish sign.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
#8 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for BH is in two scenarios.
- If the stock opens above the latest candle in the daily chart, which translates to a price of around $157.80.
- If the stock corrects to the breakout level of the falling wedge pattern at around $145.
TP: Our target prices are $165 and $175 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss at $141.50 (for entry near $145) and $153 (for entry near $157.80). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 5% to 21% in the next 4-6 months.
- Entry near $145: For a risk of $3.50, the target rewards are $20.00 and $30.00. This is a nearly 1:6 and 1:9 risk-reward trade.
- Entry near $157.80: For a risk of $4.80, the target rewards are $7.20 and $17.20. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending 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.
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