Popular American adhesives manufacturing company supplying industrial adhesives worldwide, HB Fuller Co (NYSE: FUL) 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 blue color. 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.
Daily Chart – FUL
#2 Double Bottom: In the daily chart of FUL, a double bottom pattern is being currently formed within the channel. This is shown in the figure in purple color. A Double bottom pattern is a bullish reversal pattern, indicating that the stock would possibly move upwards shortly.
#3 Good support: The daily chart of FUL shows that the stock is trading above the 50-day SMA. This is a good support level.
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) has crossed above the MACD signal line (orange color). This is a possible bullish sign.
#5 RSI moving up: The RSI is above 50 and moving up on the daily chart of FUL, indicating strength.
#6 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. The stock price is also above the 200-week SMA.
Weekly Chart – FUL
#7 RSI moving up: The RSI is above 50 and moving up on the weekly chart of FUL, indicating strength.
#8 Andrews Pitchfork support: In the weekly chart, the stock has taken support at the lower level of Andrews pitchfork tool before moving up. This lower level of pitchfork acts as a good support level.
#9 MACD’s impending Signal Line cross: The weekly chart of FUL shows that the MACD (light blue color) is about to cross above the MACD signal line (orange color). When this happens, a potential buy signal is generated.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for the stock is in two scenarios
- If the stock breaks out of the double bottom pattern. This translates to a price of $55.10
- If the stock corrects to the bottom of the falling wedge pattern. This translates to a price of around $46.50
If you need a speedier entry, you can purchase half the intended quantity of shares of FUL at the current price of $52.76.
TP: Our target prices are $65 and $75 in the next 4-6 months.
SL: To limit risk, place stop loss at $43 (if entering when the stock reaches the bottom of the falling wedge pattern) or at $49 (if entering after double bottom pattern breakout). Note that stop loss is on a closing basis.
Our target potential upside is 36% to 61% in the next 4-6 months.
- Entry at $46.50 with SL of $43: For a risk of $3.50, our target rewards are $18.50 and $28.50. This is a 1:5 and 1:8 risk-reward trade.
- Entry at $55.10 with SL of $49: For a risk of $6.10, our target reward (TP#2) is $19.90. This is a 1:3 risk-reward trade.
In other words, this trade offers nearly 3x to 8x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern and the lower level of Andrew’s pitchfork 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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