The branded consumer products company whose Hardware & Home Improvement segment offers hardware products under the National Hardware and FANAL brands; Home and Personal Care segment provides home appliances under the Black & Decker, Russell Hobbs, George Foreman, Toastmaster, etc; and Global Pet Care segment provides products under the brands of 8IN1 (8-in-1), Dingo, Nature’s Miracle, Wild Harvest, Littermaid, etc., Spectrum Brands Holdings Inc. (NYSE: SPB) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Channel: As you can see from the daily chart, the stock was trading within a channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel with high volume. A breakout from the channel usually indicates that the stock would move higher.
Daily Chart – SPB
#2 Trading above MA: The price is currently above the longer-term moving average of 200-day SMA. This implies a possible bullish bias for the stock.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.
#4 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the daily chart. It is also moving higher from oversold levels. This is a possible bullish sign.
#5 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 78.6% Fibonacci support level of the upmove before moving higher, as seen in the weekly chart. The stock is also currently trading above its 50-week as well as 200-week SMA. All these are possible bullish signs.
Weekly Chart – SPB
#6 Hammer: As you can see from the weekly chart, the latest candle formed on the chart is a Hammer. This pattern is considered as a sign of a reversal of the downward trend. A hammer usually shows that although the price went down during the week, the buyers were able to bring back the price up by the end of the week.
#7 Bullish RSI: The RSI is currently above 50 and moving higher in the weekly chart, indicating the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy the shares of SPB above the price of $85.50.
TP: Our target prices are $90 and $100 in the next 3-6 months.
SL: To limit risk, place a stop loss below $82.80. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 5% to 17% in the next 3-6 months.
For a risk of $2.70, the target rewards are $4.50 and $14.50. This is a nearly 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 with high volume from the downtrend channel. 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
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