The specialty chemical manufacturing enterprise with corporate headquarters in Charlotte, North Carolina, Albemarle Corporation (NYSE: ALB) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Rising Wedge Pattern Breakdown: The daily chart shows that ALB has recently broken down from a rising wedge pattern that was formed during the past few months. This is a bearish pattern and is marked in purple color in the daily chart. Once a stock breaks down from the bottom of the rising wedge pattern, it typically moves lower in the near-term. Currently, the stock has broken down from the rising wedge pattern, which is a possible bearish sign.
Daily Chart – ALB
#2 %K below %D in Stochastic: The %K line is currently below the %D line in stochastic of the daily chart. It is also moving down from overbought levels. All these indicate possible bearishness.
#3 Bearish ADX and DI: The ADX and DI indicate bearishness. This is because (+DI) < (-DI); ADX and (-DI) are above (+DI); and ADX has risen above both (+DI) and (-DI). All these points to possible bearishness.
#4 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#5 Price below MA: The price is currently below the short-term moving average of 50-day SMA.
This usually implies a possible bearish bias for the stock.
#6 Resistance Area: The weekly chart shows that the stock had moved down after reaching a strong resistance area, which is marked as pink color dotted line. The stock was not able to cross above this level after attempting it twice. This indicates possible bearishness.
Weekly Chart – ALB
#7 Bearish Stochastic: The stochastic in the weekly chart is moving down after reaching overbought levels. The %K line has also crossed below the %D line. All these indicate possible bearishness.
#8 Bearish RSI: The weekly chart shows that the RSI is moving down after reaching overbought levels. This is a possible bearish sign.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on ALB below the 200-day SMA. This translates to a price of around $76.
TP: Our target prices are $70 and $65 in the next 3-6 months.
SL: To limit risk, place a stop loss at $80. Note that this stop loss is on a closing basis.
Our target potential downside is 8% to 14% in the next 3-6 months.
For a risk of $4.00, our target rewards are $6.00 and $11.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
— Tara
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