The American corporation headquartered in Troy, Michigan, which manufactures automobile components for military suppliers, trucks, and trailers, Meritor Inc. (NYSE: MTOR) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Double Bottom Pattern: In the daily chart of MTOR, we can see that the stock is currently forming a double pattern. This pattern is marked in the chart in pink color. A double bottom pattern is a strong bullish pattern and a breakout from it would indicate that the stock could surge higher.
Daily Chart – MTOR
#2 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). This indicates a possible bullish bias.
#3 Bullish RSI: The RSI has currently moved up from oversold levels and is nearing 50, indicating the strength of the current upmove.
#4 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the daily chart.
This usually indicates bullishness.
#5 Bollinger Band Support: The weekly chart shows that the stock is currently moving up after taking support near the lower Bollinger Band.
At the same time, RSI is above 30 and moving up. This is usually a typical bullish setup based on the RSI-Bollinger band.
Weekly Chart – MTOR
#6 Oversold RSI: The RSI in the weekly chart is currently moving up from oversold levels. This is a possible bullish indication.
#7 Above Support area: As seen in the weekly chart, the buy level of the stock is above a long-term support area. This is marked as an orange color dotted line. This seems like a good area for the stock to bounce higher.
#8 %K above %D Line: The weekly chart shows that the %K (light blue color) of the stochastic has currently crossed above the %D line (orange color). It is also moving up from oversold levels. All these are possible bullish indications.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level of MTOR is above the breakout level of the double bottom pattern, which translates to a price of around $16.10.
TP: Our target prices are $20 and $25 in the next 3-6 months.
SL: To limit risk, place a stop loss at $13.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 24% to 55% in the next 3-6 months.
For a risk of $2.60, our target rewards are $3.90 and $8.90. This is almost 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the double bottom pattern. 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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