Kraton Corporation (NYSE: KRA) shows signs of an upcoming price surge according to its latest charts. Kraton Corporation, formerly known as Kraton Performance Polymers, Inc., manufactures and sells styrenic block copolymers, specialty polymers, and other products.
Bullish Indications
#1 Channel Breakout: The daily chart shows that the stock has been trading within a downtrend channel for the past few months. This channel is marked in the daily chart in purple color lines. Currently, the stock has broken out of this channel, indicating that it has the potential to surge ahead.
KRA – Daily Chart
#2 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock was forming a symmetrical triangle pattern. This pattern is shown as pink color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, indicating possible bullishness.
#3 Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, indicating the overall bullishness of the stock.
#4 Bullish ADX: The ADX line has started to move up from below –DI and +DI lines. The +DI line is also currently above the –DI line. All these indicate possible bullishness.
#5 MACD above Signal Line: In the daily chart, the MACD line is above the MACD signal line which is a bullish signal.
#6 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates possible bullishness.
#7 Flag Breakout: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart in orange color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case).
KRA – Weekly Chart
#8 Bullish MACD: The weekly chart shows that the MACD line has turned up and crossed above the signal line, signaling an upward turn.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for KRA is above the price of $42.00.
TP: Our target prices are $50 and $58 in the next 3-6 months.
SL: To limit risk, place a stop loss at $37.00. Note that this stop loss is on a closing basis.
Our target potential upside is almost 19% to 38% in the next 3-6 months.
For a risk of $5.00, our target rewards are $8.00 and $16.00. 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 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 the sector.
Happy Trading!
Tara
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