The American multinational tire manufacturing company that develops, manufactures, distributes, and sells tires and related products and services worldwide, Goodyear Tire & Rubber Co (NASDAQ: GT) seems to be getting ready for a price bump in the short-term as per the latest charts. This was one of the stocks we had flagged for a possible breakout.
Bullish Move – Chart Indications
#1 Channel Breakout: As you can see from the daily chart, the stock was trading within a channel during the past several months. This is marked in purple color in the daily chart below. The stock had typically taken support at the bottom of the channel before bouncing back. The stock has currently broken out of the downtrend channel, indicating possible bullishness.
Daily Chart – GT
#2 Price above MAs: The stock is currently above the short-term moving average of 50-day as well as the longer-term moving average of 200-day SMA, indicating that the bulls are currently in control.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has risen above both (+DI) and (-DI).
#4 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart. This typically indicates a bullish setup.
#5 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a long-term downtrend and started moving higher. This downtrend line is marked as a pink color line. This is a possible bullish indication.
Weekly Chart – GT
#6 Above MA: The stock is currently trading above its 50-day SMA, indicating an overall bullish bias for the stock.
#7 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#8 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line and the ADX line are also currently above –DI line 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 GT is above the previous pivot high. This translates to a price of around $17.50.
TP: Our target prices are $23 and $28 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $13.80. Note that the stop loss is on a closing basis.
Our target potential upside is 31% to 60% in the next 3-6 months.
For a risk of $3.70, our target rewards are $5.50 and $10.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 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 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
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