The auto components business company based in the United States, Fox Factory Holding Corp (NASDAQ: FOXF) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock was forming a symmetrical triangle pattern. This pattern is shown as purple lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, which is a possible bullish sign.
Daily Chart – FOXF
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA. This is a possible bullish sign.
#3 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#4 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX has started to move up from below (-DI).
#6 Fibonacci Support: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. FOXF had taken support at the 61.80% Fibonacci support level before moving higher. It has currently reached above 78.6% Fibonacci support level, as seen in the weekly chart. So, this seems like a strong support area for the stock.
Weekly Chart – FOXF
#7 Bullish MACD: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This is also a bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal entry level for FOXF is if it corrects to a range between $70 and $72. However, for those with higher risk appetite, you can purchase half the intended quantity of shares of FOXF if it trades above yesterday’s close at around $76.20.
TP: Our target prices are $80 and $90 in the next 4-6 months.
SL: To limit risk, place stop-loss at $67.70 (for entry near $71) and $73.70 (for entry near $76.20). Note that the stop-loss is on a closing basis.
Our target potential upside is 5% to 27% in the next 4 to 6 months.
- Entry near $71: For a risk of $3.30, our target rewards are $9.00 and $19.00. This is a nearly 1:3 and 1:6 risk-reward trade.
- Entry near $76.20: For a risk of $2.50, our target rewards are $3.80 and $13.80. This is a nearly 1:2 and 1:6 risk-reward trade.
In other words, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle breakout level with a 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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