The company that provides various building products and services for homebuilder and professional contractor customers in the United States, BMC Stock Holdings Inc. (NASDAQ: BMCH) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Channel Breakout: As you can see from the daily chart, the stock was trading within an uptrend channel during the past few months. This is marked in the daily chart in pink color lines. Currently, the stock has broken out of the channel. Once a stock breaks out from a channel, it has the potential to move further up.
Daily Chart – BMCH
#2 Price above MAs: 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, indicating that the bulls are still in control. This is a positive indication.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish ADX: The ADX line has started to move up from below –DI and +DI lines.
The +DI and ADX lines are also currently above –DI line. This indicates possible bullishness.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Breakout from Consolidation area: The weekly chart shows that the stock was consolidating within a price range for the past several months. This area is marked as a purple color rectangle. The stock has now broken out from this consolidation area and is currently trading above it. The breakout level of this consolidation area typically acts as a good support level.
Weekly Chart – BMCH
#7 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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of BMCH in two scenarios
- If the stock closes above yesterday’s high. This translates to a price of around $40.10.
- If the stock corrects to a price of around $34.00.
TP: Our target prices are $45 and $50 in the next 4-6 months.
SL: To limit risk, place stop-loss at $27.60 (for entry near $34) and $37.00 (for entry near $40.10). Note that the stop-loss is on a closing basis.
Our target potential upside is 12% to 47% in the next 4 to 6 months.
- Entry near $34: For a risk of $6.40, our target rewards are $11.00 and $16.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $40.10: For a risk of $3.10, our target rewards are $4.90 and $9.90. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel 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
This is the #1 Stock to Buy for the AI Tidal Wave [sponsor]Marc Chaikin warned people about NVDA before its 2023 bull run - now he's naming his next pick or the AI tidal wave. Learn more here.