The American manufacturer of snowmobiles, ATV, and neighborhood electric vehicles, Polaris Industries Inc. (NYSE: PII) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As you can see from the daily chart, the stock had recently formed a symmetrical triangle pattern. This pattern is shown as blue color lines.
This pattern represents a period of consolidation before the price breaks out and is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, indicating possible bullishness.
Daily Chart – PII
#2 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
[hana-code-insert name=’adsense-article’ /]#3 Above MAs: The stock is currently trading above both 50-day SMA, indicating that the bulls are currently in control.
#4 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating possible bullishness.
#5 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.
#6 Support Area: The weekly chart shows that the stock had bounced back after reaching near the support area.
This support level is marked as an orange dotted line. This seems like a good area for the stock to move higher.
Weekly Chart – PII
#7 %K above %D in Stochastics: The stochastics oscillator shows that the %K (blue) line is currently above the %D (orange) line in the weekly chart as well. This indicates possible bullishness.
#8 MACD above Signal Line: The weekly chart also shows that the MACD line (blue color) is currently above the signal line (orange color), indicating a possible bullish bias.
#9 Bullish RSI: The RSI is currently above 50 and moving up in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the Charts)
Buy Price: If you want to get in on this trade, the ideal buy level for PII is if the stock corrects to the breakout level of the symmetrical triangle pattern at around $88. However, for those with a higher risk appetite, you can purchase half the intended quantity of shares at the current price of $92.39.
TP: Our target prices are $100 and $110 in the next 4-6 months.
SL: To limit risk, place a stop loss at $83.80. Note that this stop loss is on a closing basis.
Our target potential upside is almost 14% to 25% in the next 4-6 months.
- Entry near $88: For a risk of $4.20, our target rewards are $12.00 and $22.00. This is an almost 1:3 and 1:5 risk-reward trade.
- Entry near $92.39: For a risk of $8.59, our target reward (TP#2) is $17.61. This is an almost 1:2 risk-reward trade.
In other words, 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 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 the sector.
Happy Trading!
Tara
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