The American packaged foods company headquartered in Chicago, Illinois, that makes and sells products under various brand names that are available in supermarkets, restaurants, and food service establishments, Conagra Brands Inc. (NYSE: CAG) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: CAG’s daily chart shows that the stock had broken out of an Ascending Triangle pattern with high volume. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – CAG
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) has currently crossed above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and the ADX line has started moved up from below (-DI) and (+DI).
#6 Strong Support Level: The weekly chart shows that the stock had bounced higher from a strong support area. This support area is marked as an orange dotted line. This seems like a good bullish indicator.
Weekly Chart – CAG
#7 MACD above Signal Line: In the weekly chart, the MACD line is currently above the MACD signal line which is a bullish signal. This is a possible bullish sign.
#8 Price above MA: The stock is currently trading above its 50-week SMA, indicating that the bulls are still in control.
#9 Cup and Handle pattern: The weekly chart shows that the stock has broken out of a cup and handle pattern. This is marked in the chart in pink color. A cup and handle pattern is a consolidation and breakout pattern and a breakout from this indicates that the stock may move higher. Typically, stocks retrace to the breakout level again before continuing the upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of CAG if it trades above yesterday’s close. This translates to a price of around $33.70. The rest of the shares can be purchased if the stock corrects to the breakout level of the ascending triangle pattern at around $31.
TP: Our target prices are $38 and $45 in the next 3-6 months.
SL: To limit risk, place a stop loss near $27.90 (for entry near $31) and $31.40 (for entry near $33.70). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 13% to 45% in the next 3-6 months.
- Entry at $31: For a risk of $3.10, the target rewards are $7.00 and $14.00. This is a nearly 1:2 and 1:5 risk-reward trade.
- Entry at $33.70: For a risk of $2.30, the target rewards are $4.30 and $11.30. This is a nearly 1:2 and 1:5 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 with high volume from the ascending triangle breakout level. 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 its sector.
Happy Trading!
Tara
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