The Wisconsin-based pump and pumping equipment manufacturing company, Gardner Denver Holdings Inc. (NYSE: GDI) seems to be gearing up for a surge as per its latest charts.
#1 IH&S Pattern: As you can see from the daily chart, the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern. A breakout from this pattern usually indicates that the stock may move higher in the short term.
#2 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 points to a bullish bias for the stock.
[hana-code-insert name=’adsense-article’ /]#3 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#4 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 potentially bullish signal.
#5 Downtrend Broken in Weekly Chart: As evident from the weekly chart, the stock was in a downtrend since the past several weeks.
This downtrend line is marked in purple color.
The stock has since then broken out of the downtrend and started a new upwards move. This is a possible bullish sign.
#6 MACD above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#8 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and ADX has started rising from below both (+DI) and (-DI). These point to a possible upmove in the near-term.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal entry level for GDI is if it corrects to the area between $31.80 and $29.65.
TP: Our target prices are $35 and $40 in the next 3-6 months.
SL: To limit risk, place a stop loss at $27. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 18% to 35% in the next 3-6 months.
- Entry near $29.65: For a risk of $2.65, the target rewards are $5.35 and $10.35. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $31.80: For a risk of $4.80, the target reward (TP#2) is $8.20. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the IH&S 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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