The stock seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in purple color. Once the stock moves up and breaks out from a bullish pattern like Falling Wedge Pattern, it has the potential to move further up.
Daily Chart – HWKN
#2 RSI-Price Positive Divergence: There is an RSI-Price positive divergence on the daily chart. The RSI made a higher low while the price made a lower low. This is marked on the chart as blue dotted lines. This indicates that the selling pressure is reducing and the stock might reverse soon.
#3 RSI nearing Oversold: The daily chart of HWKN shows that the RSI is near oversold levels.
Weekly Chart – HWKN
#5 Near Fibonacci Support in the Weekly Chart: The weekly chart of HWKN shows that the stock had been on an uptrend from March 2009 and formed a top in January 2017. Since then, the stock has been correcting. It is now near the 50% Fibonacci retracement level of this move from $12.40 to $54.45. This move is marked in purple color. After an up-move, stocks usually retrace to any of the key Fibonacci levels before surging back again. So, this 50% retracement level seems like a good support area.
#5 Long-term Support Levels: From the weekly chart, it is clear that there are two strong long-term supports for the stock. These are marked in pink and green dotted lines in the weekly chart.One of these support levels (pink line) coincides with the 50% Fibonacci retracement level as well.
#6 MACD Above Signal Line: In the weekly chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of HWKN when it pulls back to the bottom of the wedge of the daily chart. This translates to a price of $32 to $32.50.
TP: Our target price is $55 in the next 6 months.
SL: To limit risk, place stop-loss at $29.50. Note that stop loss is on a closing basis.
Our target potential upside is 72% in the next 6 months. For a risk of $2.50, our target reward is $23. This is a 1:9 risk-reward trade. In other words, this trade offers nearly 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with a high volume. 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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