The electricity company that designs, manufactures and sells electrical and electronic products for non-residential and residential construction, industrial and utility applications, Hubbell Incorporated (NYSE: HUBB) seems to be ready for a price correction in the near term according to its latest charts.
Bearish Move – Chart Indications
#1 Rising Wedge Pattern: The daily chart shows that the stock has been forming a rising wedge pattern during the past few months. This is a bearish pattern and is marked in purple color in the daily chart. The stock has currently broken down from the bottom rail of the rising wedge pattern. Once the stock breaks down from this pattern, it has the potential to move lower in the near-term.
Daily Chart – HUBB
#2 RSI moving down: The daily chart shows that the RSI is moving down after reaching near overbought levels. This indicates the stock may move lower.
[hana-code-insert name=’adsense-article’ /]#3 Bearish Stochastic: The stochastic in the daily chart shows that the %K line is below the %D line.
This is also a possible bearish sign.
#4 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color) in the daily chart.
This typically indicates possible bearishness.
#5 Price below MA: The price is currently below the 50-day SMA in the daily chart.
This is a possible bearish sign.
#6 Multiple Top Pattern: The weekly chart shows a multiple top pattern.
This is a bearish pattern and is marked in orange color. A multiple top pattern indicates that there is a weakness in the current uptrend of the stock. The stock was unable to cross above the resistance level formed by the multiple tops, indicating that there is a selling pressure at higher prices.
Weekly Chart – HUBB
#7 Weak Stochastic: The stochastic in the weekly chart also indicates weakness, as the %K line is below the %D line. The stoch is also moving down from overbought levels. All these are possible bearish signs.
#8 Bearish MACD: The MACD line (blue color) has currently crossed below the MACD signal line (orange color) in the weekly chart. This typically indicates possible bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for HUBB is below $120.
TP: Our target prices are $110 and $100 in the next 3-6 months.
SL: To limit risk, place a stop loss at $124. Note that this stop loss is on a closing basis.
Our target potential downside is 8% to 17% in the next 3-6 months.
For a risk of $4.00, our target rewards are $10.00 and $22.00. This is a nearly 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 5x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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