The California-based company that specializes in directed-energy weapons, unmanned systems, satellite communications, cybersecurity/warfare, microwave electronics, missile defense, training and combat systems, Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Descending Triangle Breakout: The stock’s daily chart shows that it had broken out of a descending triangle pattern in an upward direction. This is marked on the daily chart in purple color. The upward breakout from a bearish pattern like a descending Triangle is a good bullish sign.
Daily Chart – KTOS
#2 Price above MAs: The stock is currently trading above its 50-day as well as 200-day SMA. This shows that the bulls are currently in control.
#3 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#4 %K above %D: The stochastics reveal that the %K line is currently above the %D line in the daily chart.
This is a possible bullish sign.
#5 Near support level: The daily chart shows that the stock is currently trading above a support level.
This level is marked as a green dotted line. This seems like a good area for the stock to move higher.
#6 Breakout from Pennant Pattern: The stock was in an uptrend after which it was in a consolidation phase. This is a pennant pattern, which is marked as pink lines in the weekly chart. The stock has currently broken out of the pennant. A breakout from a continuation pattern like the pennant pattern indicates that the stock may move higher.
Weekly Chart – KTOS
#7 %K above %D: The stochastics show that the %K line is currently above the %D line in the weekly chart as well. This is a bullish sign.
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of KTOS if it trades above the previous day’s close. This translates to a price of around $20.50.
TP: Our target prices are $25 and $30 in the next 3-6 months.
SL: To limit risk, place a stop loss at $17.40. Note that the stop loss is on a closing basis.
Our target potential upside is almost 22% to 46% in the next 3-6 months.
For a risk of $3.10, our target rewards are $4.50 and $9.50. This is a 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 with high volume from the support 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 the sector.
Happy trading!
Tara
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