The well-known American motorcycle manufacturer founded in 1903 in Milwaukee, Wisconsin, Harley-Davidson Inc. (NYSE: HOG) seems to be poised for a price surge according to its charts.
Bullish Indications
#1 Ascending Triangle Pattern breakout: The daily charts shows that the stock has broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the daily chart in purple color. A breakout from a bullish pattern like this usually indicates the possibility of an upmove in the near-term.
Daily Chart – HOG
#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 bullish.
[hana-code-insert name=’adsense-article’ /]#3 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control
#4 IH&S Pattern Breakout: From the daily chart, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart in orange color.
An IH&S pattern is a bullish pattern.
A breakout from an IH&S pattern is usually the sign of an upcoming bullish move.
Currently, the stock has broken out of the pattern, indicating possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI). These point to a possible upmove in the near-term.
#6 Support At Fibonacci Level: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. HOG had taken support at the 38.2% Fibonacci support level of the upmove and has now crossed above it, as seen in the weekly chart. This seems like a good point to bounce up higher.
Weekly Chart – HOG
#7 Bullish MACD: The MACD line (blue color) is above the MACD signal line (orange color) in the weekly chart as well, indicating a possible bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy the shares of HOG in two scenarios
- If the stock corrects to the breakout level of IH&S pattern at around $37.
- If the stock closes above the resistance level of $41.50.
TP: Our target prices are $45 and $55 in the next 4-6 months.
SL: To limit risk, place a stop loss at $33.80 (for entry near $37) and $37.70 (for entry near $41.50). Note that this stop loss is on a closing basis.
Our target potential upside is almost 22% to 49% in the next 4-6 months.
- Entry near $37: For a risk of $3.20, our target rewards are $8.00 and $18.00. This is a 1:3 and 1:6 risk-reward trade.
- Entry near $41.50: For a risk of $3.80, our target reward TP#2) is $13.50. This is a nearly 1:4 risk-reward trade.
In other words, this trade offers nearly 3x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the IH&S 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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