The American company that manufactures and sells custom, cruiser, and touring motorcycles, Harley-Davidson Inc. (NYSE: HOG) seems to be poised for a price surge in the near-term.
Bullish Indications
#1 Channel Breakout: The daily chart shows that the stock was trading within a channel for the past few months. This channel is marked on the daily chart in pink color. Currently, the stock has broken out of the channel. This seems like a possible bullish indication.
Daily Chart – HOG
#2 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
#4 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. This indicates that the bulls are currently in control.
#5 Bullish Stochastic: The %K line is currently above the %D line in the stochastic. This indicates possible bullishness.
#6 IH&S Pattern Breakout: The weekly chart shows that the stock was forming an inverted head and shoulders pattern. This pattern is marked in the chart in orange color. A breakout from a bullish pattern like the IH&S pattern indicates the possibility of an upmove. Currently, the stock has broken out of the IH&S pattern, indicating possible bullishness.
Weekly Chart – HOG
#6 Bullish MACD: The MACD line (blue color) is above the MACD signal line (orange color) in the weekly chart as well, indicating possible bullishness.
#7 Bullish Stochastic: The %K line is currently above the %D line in the stochastic in the weekly chart as well, indicating possible bullishness.
#8 Bullish ADX and DI: In the weekly chart the ADX indicator shows bullishness. This is because (+DI) is greater than (-DI), and ADX is starting to rise from below both (+DI) and (-DI). This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for HOG is above $46.70.
TP: Our target prices are $51 and $60 in the next 3-6 months.
SL: To limit risk, place a stop loss at $44.00. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 9% to 28% in the next 3-6 months.
For a risk of $2.70, our first target reward is $4.30 and the second target reward is $13.30. This is a 1:2 and 1:5 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 from the channel breakout level and the inverted head and shoulders pattern 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 new government rules or regulatory changes in its sector.
Happy Trading!
Tara
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