The compliance company that specializes in collecting and disposing of regulated substances, such as medical waste and sharps, pharmaceuticals, hazardous waste, and providing services for recalled and expired goods, Stericycle Inc. (NASDAQ: SRCL) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: SRCL’s daily chart shows that the stock had recently formed an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the daily chart in purple color. Currently, the stock has broken out of the ascending triangle pattern, indicating possible bullishness.
Daily Chart – SCRL
#2 Trading Above MAs: The stock is currently trading above both its short-term moving average of 50-day and the long-term moving average of 200-day SMA, which implies that the bulls are currently in control. This is a possible bullish sign.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is typically considered a bullish signal.
#4 Bullish ADX and DI: The ADX line has currently started to move up from below –DI and +DI lines in the daily chart. The +DI line and the ADX line is 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 a possible bullish bias.
#6 IH&S Breakout: As you can see from the weekly chart, the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term. The stock is also trading above its 50-week as well as 200-week SMA, indicating an overall bullishness.
Weekly Chart – SCRL
#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, the ideal buy level for SRCL is above the price of $75.00. Alternatively, you can purchase the shares of SRCL if it corrects to the breakout level of the ascending triangle pattern at around $66.
TP: Our target prices are $85 and $100 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $59 (for entry near $66) and $68.30 (for entry near $75). Note that this stop loss is on a closing basis.
Our target potential upside is 13% to 52% in the next 3-5 months.
- Entry near $66: For a risk of $7.00, the target rewards are $19.00 and $34.00. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry near $75: For a risk of $6.70, the target rewards are $10.00 and $25.00. This is a nearly 1:2 and 1:4 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 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