The American automotive service company focusing on scheduled maintenance, undercar repairs, and retail tire sales, Monro Inc. (NASDAQ: MNRO) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Symmetrical Triangle Pattern Breakdown: The daily chart shows that the stock was forming a symmetrical triangle pattern during the past few months. This is marked in orange color in the chart. The stock has currently broken down from the symmetrical triangle pattern. Once a breakdown from this pattern occurs, the stock typically moves lower in the near-term.
Daily Chart – MNRO
#2 Bearish MACD: The MACD line is currently below the MACD signal line in the daily chart, which is a possible bearish indication.
#3 Bearish ADX and DI: The ADX and DI indicate bearishness as per the daily chart.
This is because (-DI) has crossed above (+DI) and ADX is below both (+DI) and (-DI) and moving higher.
All these points to possible bearishness.
#4 Bearish Aroon: The Aroon indicator shows bearishness as the Aroon up is below 30 and the Aroon down is above 70.
#5 Price below MAs: The daily chart shows that the stock is currently trading below the long-term moving average of 200-day SMA, as well as the short-term moving average of 50-day SMA. All these points to overall weakness.
#6 Bearish Flag Pattern: The weekly chart shows that the stock was forming a bearish flag pattern during the past several weeks. This is marked in purple color lines. A breakdown from a flag pattern usually indicates bearishness. Currently, the stock has broken down from the flag pattern, indicating bearishness.
Weekly Chart – MNRO
#7 Bearish CCI: The weekly chart shows that CCI is currently moving down after reaching overbought levels, indicating possible bearishness.
#8 Bearish Stoch: The %K line (blue color) of the stochastic is below the %D line (orange color) in the weekly chart. This is a possible bearish indication.
#9 Price below MAs: The stock is currently trading below the 50-week as well as 200-week SMA as well, indicating that the bears have currently gained control.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on MNRO at the price of around $50.
TP: Our target prices are $45 and $40 in the next 3-6 months.
SL: To limit risk, place a stop loss at $53.40. Note that this stop loss is on a closing basis.
Our target potential downside is 10% to 20% in the next 3-6 months.
For a risk of $3.40, our target rewards are $5.00 and $10.00. This is a nearly 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 upwards from the symmetrical triangle pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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