The American designer, manufacturer, and marketer of outdoor sports and recreation products, Vista Outdoor Inc. (NYSE: VSTO) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: The daily chart of VSTO 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.
#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 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).
#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.
#5 MACD above Signal Line: In the daily chart, the MACD line is above the MACD signal line which is a bullish signal.
#6 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#7 Double Bottom Pattern Breakout: The weekly chart shows that the stock has currently broken out of a double bottom pattern. This is marked in pink color. A double bottom pattern is a strong bullish pattern and a breakout from it would indicate that the stock could surge higher.
Weekly Chart – VSTO
#8 Bullish Stoch: The %K line (blue color) is above the %D line (orange color) of the stochastic, indicating possible bullishness. The stock is also trading above its 50-week SMA, indicating that the bulls are still in control.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the recommended buy level for VSTO is above $12.00.
TP: Our target prices are $14 and $18 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $10.70. Note that this stop loss is on a closing basis.
Our target potential upside is 17% to 50% in the next 4-6 months.
For a risk of $1.30, the target rewards are $2.00 and $6.00. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 5x 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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