Krispy Kreme Inc. (NASDAQ: DNUT) seems to be poised for a price surge as per its latest charts. The company, together with its subsidiaries, operates through an omni-channel business model to provide doughnut experiences and produce doughnuts. It also produces cookies, brownies, cookie cakes, ice cream, cookie-wiches, and cold milk, as well as doughnut mixes, other ingredients, and doughnut-making equipment.
Bullish Indications
#1 Double Bottom Pattern Breakout: As you can see from the daily chart below, the stock had recently broken out of a double bottom pattern. This is marked in purple color. A double bottom pattern is a bullish reversal pattern, and a breakout from it indicates that the stock could move upwards.
DNUT – Daily Chart
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA, indicating that the bulls are slowly gaining 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 the –DI and +DI lines. This indicates possible bullishness.
#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.
#6 Above Support Area: As you can see from the daily chart, the stock has currently moved up from a support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher.
DNUT – Weekly Chart
#7 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart and is also moving higher from oversold levels. This is a possible bullish indication.
#8 Bullish RSI: In the weekly chart, the RSI is currently nearing 50 and moving higher. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of DNUT above the price of around $13.60.
TP: Our target prices are $15 and $16 in the next 3-6 months.
SL: To limit risk, place stop-loss at $12.80. Note that the stop-loss is on a closing basis.
Our target potential upside is 10% to 18% in the next 3 to 6 months.
For a risk of $0.80, our target rewards are $1.40 and $2.40. This is a nearly 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 from the breakout level of the double bottom pattern 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.
Happy Trading!
Tara
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