The American aluminum producer and a spinoff from Kaiser Aluminum and Chemicals Corporation, Kaiser Aluminum Corp. (NASDAQ: KALU) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Consolidation Area Breakout: The daily chart shows that the stock was trading within a consolidation area for the past several months. This is marked in the daily chart in a pink color rectangle. Currently, the stock has broken out of this consolidation area with a high volume. Once a stock breaks out from a consolidation area, it usually moves higher.
Daily Chart – KALU
#2 Above MAs: The stock is currently trading above its short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating the overall bullishness of the stock.
#3 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color). This indicates a possible bullish bias.
#4 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.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line and the ADX line are greater than (-DI), and ADX has started to move up from below (-DI) and (+DI) lines.
#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out of its short-term downtrend. The downtrend line is marked in pink color. This seems like a possible bullish indication.
Weekly Chart – KALU
#7 Double Bottom Pattern Breakout: The weekly chart shows that the stock had recently formed a double bottom pattern, which is marked in purple color. It has currently broken out of this double bottom pattern. Once a breakout from a bullish pattern like a double bottom pattern occurs, the stock usually moves higher.
#8 Bullish MACD: In the weekly chart as well, the MACD line is currently above the MACD signal line. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of KALU if it trades above the price of around $90.00
TP: Our target prices are $100 and $110 in the next 3-6 months.
SL: To limit risk, place a stop loss at $84.00. Note that this stop loss is on a closing basis.
Our target potential upside is almost 11% to 22% in the next 3-6 months.
For a risk of $6.00, our target rewards are $10.00 and $20.00. This is almost 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 with high volume from the consolidation area. 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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