Lumber and building materials manufacturer and distributor headquartered in Boise, Idaho, Boise Cascade Co (NYSE: BCC) seem to be poised for a price surge after a possible correction 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 weeks.
[hana-code-insert name=’adsense-article’ /]This is marked in the daily chart in blue color.Currently, the stock is nearing the bottom of the falling wedge pattern.
A Falling Wedge Pattern is a bullish pattern.
Once the stock moves up and breaks out from it, it has the potential to move further up.
Note: the stock was in a strong uptrend for the past several months.
Then the stock started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. (flagpole is marked in orange line in the daily chart) Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case.
Daily Chart – BCC
#2 RSI Nearing Oversold: The daily chart of BCC shows that the RSI is nearing oversold levels and could reverse from here.
#3 Near Fibonacci Support: The daily chart of BCC shows that the stock had taken support near the 61.8% Fibonacci retracement level. After an up-move, stocks usually retrace to any of the key Fibonacci levels before surging back again. There is also the 50% Fibonacci retracement level closeby, which can act as the next support level for the stock.
#4 MA Cross: The weekly chart of BCC shows that the short-term moving average of 50-week SMA has crossed above the longer-term moving average of 200-week SMA. Such crossovers indicate a possible upcoming bullish movement. The stock is also currently trading above both 50-week and 200-week SMA, which implies that the bulls are still in control.
Weekly Chart – BCC
#5 Unbroken Uptrend in Weekly Chart: As evident from the weekly chart, the stock is in an uptrend as it has been making higher highs and higher lows for the past several months.
#6 Good Support Levels Nearby: There are good supports for the stock nearby. The current price level is near a long-term support level for the stock. This is marked by a green dotted line. The trendline is also close by and can act as a good support level. This is marked as a blue line.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of BCC if the stock corrects to level of around $35 – $37.50.
TP: Our first target price (TP#1) is $48 in the next 4 months and the second target price (TP#2) is $55 in the next 6 months.
SL: To limit risk, place stop-loss at $33.80. Note that stop loss is on a closing basis.
Our target potential upside is 28% to 57% in the next 4-6 months.
- Entry at $35: For a risk of $1.20, our target rewards are $13 and $20. This is a 1:11 and 1:17 risk-reward trade.
- Entry at $37.50: For a risk of $3.70, our target rewards are $10.50 and $17.50. This is a 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 17x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the trendline support 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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