The American retail company headquartered in Columbus, Ohio with over 1,400 stores in 47 states, Big Lots, Inc. (NYSE: BIG) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Channel Breakout: The daily chart of BIG shows that the stock was trading within a channel for the past several months. This channel is marked in the daily chart in pink color. There were some unsuccessful attempts done to break out of the channel during these months.
Currently, the stock has broken out of the channel. This shows that the stock has gained momentum and has the potential to move further up. There was also good volume during the breakout, indicating that the breakout could sustain this time around.
Daily Chart – BIG
#2 Bullish Candlestick: The latest candle in the daily chart was a long green bullish candle and was formed with good volume. This is usually a positive sign.
[hana-code-insert name=’adsense-article’ /]#3 Above MA: The stock is currently trading above its 50-day SMA.
This indicates overall bullishness of the stock.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and (+DI) is above (-DI).
#5 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the signal line (orange color).
This is a possible bullish setup.
#6 Bullish Stochastic: The daily chart shows that the %K line is above the %D line in the stochastic. This indicates that an upmove may be imminent.
#7 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Weekly Chart – BIG
#8 MACD-Price Bullish Divergence: There is a bullish divergence between the MACD and price in the weekly chart. While the price formed a lower low, the MACD formed to a higher low. This is marked as blue dotted lines in the weekly chart. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of shares of BIG if it trades above the previous close. This translates to a price above $25.25.
The rest of the shares can be purchased, either above the resistance level of $27.60, or if it corrects to the breakout level of $21.30.
TP: Our target prices are $32 and $40 in the next 4-6 months.
SL: To limit risk, place a stop loss around $20.70 (for entry near $21.30 and $25.25) and $24.00 (for entry near $27.60). Note that this stop loss is on a closing basis.
Our target potential upside is almost 15% to 88% in the next 4-6 months.
- Entry at $21.30: For a risk of $0.60, our target rewards are $10.70 and $18.70. This is a nearly 1:18 and 1:31 risk-reward trade.
- Entry at $25.25: For a risk of $4.55, our target rewards are $6.75 and $14.75. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at $27.60: For a risk of $3.60, our second target reward (TP#2) is $12.40. This is a nearly 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 31x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the channel breakout level. 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
[hana-code-insert name=’stansberry-article’ /]