The integrated wood products manufacturer and building materials distributor with operations throughout the United States and a manufacturing facility in Canada, Boise Cascade Co (NYSE: BCC) seem to be gearing up for a surge as per its latest charts.
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as blue color lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
#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 implies a possible bullish bias for the stock.
This is a possible bullish setup.
#4 Bullish Aroon: The Aroon indicator denotes bullishness, as the value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
#5 Channel: The daily chart shows that the stock had formed a trend channel in the last few months.
This is marked as orange color lines.
Currently, the stock is near the upper rail of this trend channel. Once the stock breaks out of this channel, it could move higher.
#6 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX is starting to move up from below (-DI) and (+DI).
#7 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. BCC had taken support at the 23.6% Fibonacci support level of the upmove, as seen in the weekly chart. This is a possible bullish sign.
#8 MACD above Signal Line: Tthe MACD line (blue color) is currently above the signal line (orange color) in the weekly chart as well, indicating a bullish bias.
#9 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for BCC is above the resistance level of $30.
TP: Our target prices are $50 and $60 in the next 3-6 months.
SL: To limit risk, place a stop loss at $20.90. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 66% to 100% in the next 3-6 months.
For a risk of $9.10, the target rewards are $20.00 and $30.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x 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 its sector.
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