The American manufacturing company based in Cincinnati, Ohio, currently focused on manufacturing electrically powered delivery and utility vehicles, Workhorse Group Inc. (NASDAQ: WKHS) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle pattern Breakout: The daily chart shows that the stock has broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the chart in purple color. A breakout from a bullish pattern like this usually indicates the possibility of an upmove in the near-term.
Daily Chart – WKHS
#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 MACD: The MACD line is above the MACD signal line in the daily chart, indicating possible bullishness.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started to move up from below (-DI) and (+DI).
#5 Bullish Stoch: The %K line (blue line) is currently above the %D line (orange line) of the stochastic in the daily chart. This usually indicates bullishness.
#6 Pennant Pattern Breakout: The weekly chart shows that the stock has currently broken out of a pennant pattern. This pattern is marked in pink color lines. This is a possible bullish sign.
Weekly Chart – WKHS
#7 MACD Above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is also a possible bullish sign.
#8 Above MAs: In the weekly chart as well, the stock is currently trading above both its 50-week and 200-week SMA, which implies that the bulls are now in control.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for WKHS is if it corrects to the breakout level of the ascending triangle pattern, at around $30.60. However, you can purchase half the intended quantity of shares of WKHS if it trades above yesterday’s close, at around $35.00.
TP: Our target prices are $40 and $44 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $25.20 (for entry near $30.60) and $32.00 (for entry near $35.00). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 14% to 44% in the next 3-5 months.
- Entry at $30.60: For a risk of $5.40, the target rewards are $9.40 and $13.40. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at $35.00: For a risk of $3.00, the target rewards are $5.00 and $9.00. 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 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