The Texas-based global provider of galvanizing, welding solutions, specialty electrical equipment, and highly engineered services, AZZ Inc. (NYSE: AZZ) seems to be getting ready for a surge in its price as per the latest charts.
Bullish Move – Chart Indications
#1 Ascending Triangle Pattern: The daily chart of AZZ shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in blue color. Once a breakout from this pattern happens, the stocks typically move higher. The breakout level of the ascending triangle pattern also generally acts as a good support level.
Daily Chart – AZZ
#2 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
[hana-code-insert name=’adsense-article’ /]#3 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.
#4 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines.
The +DI line is also currently above –DI line. This indicates possible bullishness.
#5 Bullish RSI: The RSI is currently above 50 and moving up.
This indicates possible bullishness.
#6 Support at Fibonacci Level: The weekly chart shows that the stock had been on an uptrend after which it has been correcting. It is now moving up after taking support near the 50% Fibonacci retracement level of this move and is moving upwards. Stocks usually retrace to any of the key Fibonacci levels before resuming its upmove. So, this seems like a good support area.
Weekly Chart – AZZ
#7 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 bullish.
#8 Flag Pattern: The weekly chart shows that the stock has been forming a flag pattern since the past several months. This is marked as pink color lines. Once it breaks out from this pattern, the stock may move higher.
#9 Bullish ADX: In the weekly chart as well, the ADX line is starting to move up from below –DI and +DI lines. The +DI line is also currently above –DI line. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal entry level for purchasing the shares of AZZ is above the breakout level of the ascending triangle pattern at around $49.
TP: Our target prices are $60 and $70 in the next 3-5 months.
SL: To limit risk, place a stop loss below $45.20. Note that the stop loss is on a closing basis.
Our target potential upside is 22% to 43% in the next 3-5 months.
For a risk of $3.80, our first target reward is $11.00 and the second target reward is $21.00. This is a nearly 1:3 and 1:6 risk-reward trade.
In other words, this trade offers 3x 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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