RR Donnelley & Sons Co (NYSE: RRD) seems to be getting ready for a price bump in the short-term as per the latest charts. The company provides marketing and business communications, commercial printing, and related services.
Bullish Move – Chart Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock was forming a downtrend channel during the past several months. This is marked in pink color. 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.
RRD – Daily Chart
#2 Price above MAs: The stock is currently above the 50-day as well as 200-day SMA, indicating that the bulls currently have an upper hand.
#3 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line and ADX line are currently above the (-DI) line, and the ADX line has started to move higher from below the +DI and -DI lines.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.v
#6 Flag Pattern 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). Currently, the stock has broken out of the flag pattern, indicating possible bullishness.
RRD – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently above 50 and moving higher, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for RRD is above the price of $7.20. This is marked as a green color dotted line in the daily chart.
TP: Our target prices are $11 and $13 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $5.10. Note that the stop loss is on a closing basis.
Our target potential upside is 53% to 81% in the next 3-6 months.
For a risk of $2.10, our first target reward is $3.80 and the second target reward is $5.80. 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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