The designer and manufacturer of a range of power generation equipment and other engine powered products, Generac Holdings Inc. (NYSE: GNRC) seems to be getting ready for a surge in its price as per the latest charts.
Bullish Move – Chart Indications
#1 Ascending triangle pattern Breakout: The daily chart of GNRC shows that the stock has 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. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – GNRC
#2 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 potential buy signal.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Stoch: The %K line is above the %D line of the stochastic and it has moved from oversold, indicating possible bullishness.
#4 Above MAs: The stock is currently trading above both 50-day as well as 200-day SMA.
This means that the bulls are currently in control.
#5 Alligator Awake: William’s Alligator is currently awake up in an upward direction (green line above the red line and blue line) and candles have formed above the three lines.
This indicates a possible bullish bias.
#6 Rounding Bottom Pattern: The stock’s weekly chart shows that it has broken out of a rounding bottom pattern. This pattern is marked in orange color and usually indicates that the trend would soon have a bullish bias.
Weekly Chart – GNRC
#8 Bullish Stochastic: The %K is above %D in the weekly chart as well, indicating bullishness.
#9 Bullish MACD: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of stocks of GNRC at the current price of $62.75 and the rest if the stock corrects to the breakout level of the ascending triangle pattern at around $60.
TP: Our target prices are $70 and $80 in the next 3-5 months.
SL: To limit risk, place a stop loss below $56.80 (entry at $60) and $58.40 (entry at $62.75). Note that the stop loss is on a closing basis.
Our target potential upside is 12% to 33% in the next 3-5 months.
- Entry at $60: For a risk of $3.20, our first target reward is $10.00 and the second target reward is $20.00. This is a nearly 1:3 and 1:6 risk-reward trade.
- Entry at $62.75: For a risk of $4.35, our target rewards are $7.25 and $17.25. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the ascending triangle with high volume. 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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