Compass Minerals International, Inc. (NYSE: CMP) seems poised for a price surge based on its latest charts. The company provides essential minerals in the United States, Canada, the United Kingdom, and internationally. It operates through two segments, Salt and Plant Nutrition. CMP is a leading producer of minerals, including salt, magnesium chloride, and sulfate of potash. Products from Compass Minerals serve a variety of applications in consumer, industrial, chemical, and agricultural markets.
Bullish Indications
#1 Breakout from Ascending Triangle: The daily chart shows that the stock has currently broken out of an Ascending Triangle pattern with a high volume. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color lines. A breakout from this pattern typically indicates bullishness. The base of the triangle generally acts as a good support level after the breakout.
CMP – Daily Chart
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in control. This is a positive indication.
#3 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.
#4 Bullish Stoch: The %K line (blue color) is above the %D line (orange color) of the stochastic in the daily chart and is also moving higher from oversold levels. This indicates possible bullishness.
#5 Above Support Area: As you can see from the weekly 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.
CMP – Weekly Chart
#6 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart, indicating bullishness.
#7 Bullish RSI: In the weekly chart, the RSI is currently above 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 shares of CMP above the price of around $15.10.
TP: Our target prices are $19 and $22 in the next 3-6 months.
SL: To limit risk, place stop-loss at $13.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 26% to 46% in the next 3 to 6 months.
For a risk of $2.10, our target rewards are $3.90 and $6.90. 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 ascending triangle 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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