The medical supplies conglomerate primarily in the business of veterinary and dental products, Patterson Companies, Inc. (NASDAQ: PDCO) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: The daily chart of PDCO shows that the stock has currently broken out of an Ascending Triangle pattern and moved higher. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – PDCO
#2 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.
#3 Bullish RSI: The RSI is above 50 in the daily chart and moving up.
This indicates possible bullishness.
#4 Bullish CCI: The CCI indicator is currently moving up from oversold levels.
This indicates possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) and ADX line are greater than (-DI), and the ADX line has started rising from below both (+DI) and (-DI).
#6 IH&S Pattern Breakout: From the weekly 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.
Weekly Chart – PDCO
#7 MACD above Signal Line: In the weekly chart, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week SMA, indicating that the bulls are still in control.
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
#9 Bullish ADX and DI: In the weekly chart as well, the ADX indicator shows bullishness because the ADX, as well as the (+DI) lines, are greater than (-DI), and the ADX line has now risen above both (+DI) and (-DI) lines.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the recommended buy level for PDCO is above $25.00.
TP: Our target prices are $30 and $35 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $22.30. Note that this stop loss is on a closing basis.
Our target potential upside is 20% to 40% in the next 4-6 months.
For a risk of $2.70, the target rewards are $5.00 and $10.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle and 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 its sector.
Happy Trading!
Tara
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