The company that engages in the manufacture and marketing of specialty food products, Lancaster Colony Corp. (NASDAQ: LANC) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart of LANC 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 this pattern. Once the stock moves breaks out from a bullish pattern like the Falling Wedge Pattern, it has the potential to move further up.
Daily Chart – LANC
#2 Bullish Stoch: The %K line of the stochastic is currently above the %D line in the daily chart, 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 near 50 and moving up.
This indicates the strength of the current upmove.
#5 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again.
LANC has now taken support at the 38.2% Fibonacci support level as seen in the weekly chart and has started moving up.
So, this seems like a strong support area for the stock.
Weekly Chart – LANC
#6 Oversold RSI: The RSI is moving up after reaching oversold levels in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, purchase half the intended quantity of LANC if it crosses above the resistance level of $149.60. The remaining shares can be purchased if the stock closes above $160. For those with higher risk appetite, you can purchase the first half of the stock at the current price of $147.65, and stop loss as $144.
TP: Our target prices are $160 and $175 in the next 4 to 6 months.
Note: However, if the stock exhibits weakness when attempting to close above $160, it is best to exit the trade after achieving the first target.
SL: To limit risk, place a stop loss below $144 (for entry near $149.50) and $154.60 (for entry near $160). Note that this stop loss is on a closing basis.
Our target potential upside is almost 7% to 17% in the next 4-6 months.
- Entry at $149.60: For a risk of $5.60, our first target reward is $10.40 and the second target reward is $25.40. This is a 1:2 and 1:5 risk-reward trade.
- Entry at $160: For a risk of $5.40, our target reward is $15.00. This is a 1:3 risk-reward trade.
Overall, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The 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
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