Revlon Inc. (NYSE: REV) seems to be poised for a price surge as per its latest charts. The company develops, manufactures, markets, distributes, and sells beauty and personal care products worldwide.
#1 Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in pink color. The chart shows that the stock has currently broken out of a downtrend channel. Once a stock breaks out from a downtrend channel, it has the potential to move further up.
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA, indicating that the bulls are still in control. This is a positive indication.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#5 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a new support level with a historic high volume. This level is marked as a purple dotted line. This looks like a good area for the stock to start a new uptrend.
#6 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well, and is also moving higher from oversold levels. This is a possible bullish indication.
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of REV above the price of around $8.40. Alternatively, you can purchase the shares of REV if it corrects to the price of around $7.70.
TP: Our target prices are $9.40 and $13.00 (for entry near $7.70) and $11.50 and $15 (for entry near $8.40) in the next 3-6 months.
SL: To limit risk, place stop-loss at $6.70 (for entry near $7.70) and $6.50 (for entry near $8.40). Note that the stop-loss is on a closing basis.
Our target potential upside is 22% to 79% in the next 3 to 6 months.
- Entry near $7.70: For a risk of $1.00, our target rewards are $1.70 and $5.30. This is a nearly 1:2 and 1:5 risk-reward trade.
- Entry near $8.40: For a risk of $1.90, our target rewards are $3.10 and $6.60. This is a nearly 1:2 and 1:4 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 trend channel with a 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.
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