The industry-leading installer of insulation and complementary building products headquartered in Columbus, Ohio, Installed Building Products Inc. (NYSE: IBP) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Double Bottom Pattern: The daily chart shows that the stock is currently forming a double bottom pattern. This pattern is marked in the daily chart in pink color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards. Currently, the stock seems to be almost ready for a double bottom pattern breakout.
Daily Chart – IBP
#2 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#3 Bullish Stoch: The %K line (blue color) is above the %D line (orange color) of the stochastic, indicating possible bullishness.
#4 Bullish RSI: The RSI is currently nearing 50 after moving up from oversold levels.
This indicates the strength of the current upmove.
#5 Near Gap Support: The daily chart shows that the stock is currently trading near gap support.
This is marked as an orange color dotted line.
This seems like a good area for the stock to surge higher.
#6 Bounceback from support area: The weekly chart shows that the stock is currently moving up after taking support near a long-term support level. This support level is marked as a pink color dotted line. This seems like a good area for the stock to bounce higher.
Weekly Chart – IBP
#7 Oversold RSI: The RSI is currently near oversold levels and moving higher. This is a possible bullish indication.
#8 Bullish Stoch: The Stochastic indicator shows that the %K line has crossed above the %D line. The indicator is also moving higher from oversold levels. All these are possible bullish indications.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of IBP above the breakout level of the double bottom pattern. This translates to a price of around $47.40.
TP: Our target prices are $55 and $60 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $42.20. Note that the stop loss is on a closing basis.
Our target potential upside is 16% to 27% in the next 3-6 months.
For a risk of $5.10, our first target reward is $7.70 and the second target reward is $12.70. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the double bottom pattern with 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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