The popular American-based chain of department stores headquartered in Seattle, Washington, Nordstrom, Inc. (NYSE: JWN) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: 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. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
Daily Chart – JWN
#2 ADX moving up: The ADX line is currently above the –DI line and moving up. The +DI line is also above the –DI line. These are good bullish indications.
[hana-code-insert name=’adsense-article’ /] #3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.#4 Above MA: In the daily chart of JWN, the stock is currently trading above both 50-day and 200-day SMA. This implies that the bulls are currently in control.
However, the daily chart also shows that the RSI is currently near overbought levels and moving down. The %K line of the stochastic has also crossed below the %D line. All these points to a possible near-term decline in price before the next upmove.
#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. The stock is currently consolidating and is above its 50-week SMA. This points to a possible breakout in the near future.
Weekly Chart – JWN
#6 Alligator Waking Up: William’s Alligator is currently waking up in an upward direction (green line above the red line and blue line). This indicates a possible bullish bias.
#7 MACD above Signal Line: The weekly chart shows that the MACD line (blue color) is currently above the signal line (orange color). This is a possible bullish setup.
#8 Strong Stochastic: The %K line is above the %D line in stochastic and is moving up, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for JWN is in two scenarios.
- If the stock corrects to the falling wedge breakout level. This translates to a price of around $50.
- If the stock breaks out of the long-term resistance level (orange line). This translates to a close of around $53.
TP: Our target prices are $60 and $70 in the next 4-6 months.
SL: To limit risk, place stop-loss at $47.50. Note that the stop loss is on a closing basis.
Our target potential upside is 20% to 40% in the next 4-6 months.
- Entry at $50: For a risk of $2.50, our target rewards are $10.00 and $20.00. This is a 1:4 and 1:8 risk-reward trade.
- Entry at $53: For a risk of $5.50, our target reward (TP#2) is $17.00. 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 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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