The Wendy’s Company (NASDAQ: WEN) seems poised for a price surge based on its latest charts. The company is involved in operating, developing, and franchising a system of quick-service restaurants specializing in hamburger sandwiches. It operates through Wendy’s U.S., Wendy’s International, and Global Real Estate & Development segments.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock had been trading within a downtrend channel during the past few weeks. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel with a high volume. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
WEN – Daily Chart
#2 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.
#3 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#4 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a strong support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher.
WEN – Weekly Chart
#5 %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.
#6 Bullish RSI: In the weekly chart, the RSI is currently moving higher from oversold levels. This is a possible bullish sign.
#7 Bullish Divergence: The weekly chart shows that the stock is forming a bullish divergence. A bullish divergence occurs when the price is making lower lows, but the RSI is making higher lows. It usually indicates underlying strength and is a hint of a potential uptrend as the bears are losing power. The bullish divergence is marked as a green color dotted line in the weekly chart.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of WEN above the price of around $15.65.
TP: Our target prices are $18.50 and $21.00 in the next 3-6 months.
SL: To limit risk, place stop-loss at $14.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 18% to 34% in the next 3 to 6 months.
For a risk of $1.65, our target rewards are $2.85 and $5.35. 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 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.
Happy Trading!
Tara
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