The healthcare and pharmaceutical company, based in Stuttgart, Germany, McKesson Corporation (NYSE: MCK) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Channel Breakout: As you can see from the daily chart of MCK, the stock was trading within an uptrend channel for the past several months. This channel is marked on the chart in orange color. The stock has finally broken out of this channel. This looks like a bullish indication.
Daily Chaty – MCK
#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.
#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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30.
This indicates bullishness.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines.
The +DI line as well as the ADX line are also currently above –DI line. This indicates possible bullishness.
#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a short-term downtrend and started a new uptrend. This is a possible bullish sign.
Weekly Chaty – MCK
#7 Bullish RSI: The Relative Strength Index is currently above 50 and moving higher. This is a possible bullish sign.
#8 Price Above MAs: In the weekly chart as well, the stock is currently trading above both its 50-week and 200-week SMA, which implies that the bulls are currently in control.
#9 Bullish MACD: The MACD line (light blue color) is currently above the MACD signal line (orange color) in the weekly chart as well, which is typically considered bullish.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of MCK is if the stock corrects back to a price of around $160.00.
However, for those with a higher risk appetite, you can purchase half the intended quantity of shares if it trades above the previous close, at around $168.10.
TP: Our target prices are $175 and $190 in the next 4 to 6 months.
SL: To limit risk, place a stop loss around $154.70 (for entry near $160) and $163.40 (for entry near $168.10). Note that this stop loss is on a closing basis.
Our target potential upside is 4% to 19% in the next 3-5 months.
- Entry near $160: For a risk of $5.30, the target rewards are $15.00 and $30.00. This is a nearly 1:3 and 1:6 risk-reward trade.
- Entry near $168.10: For a risk of $4.70, the target rewards are $6.90 and $21.90. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the channel 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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