The American multinational commercial printing company based in Chicago, IL, LSC Communications Inc. (NYSE: LKSD) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 IH&S Pattern: The stock’s daily chart shows that the stock has been forming an Inverted Head and Shoulders pattern. This is marked in the chart in orange color. This is a possible sign of an upcoming bullish move.
Daily Chart – LKSD
#2 Double Bottom: The stock is currently forming the second bottom of a double bottom pattern (marked in pink color). Once the stock breaks out of a bullish pattern like the double bottom pattern, it can move higher.
[hana-code-insert name=’adsense-article’ /]#3 RSI moving up: The RSI is currently moving up from oversold levels. The stock is also trading near its 50-day SMA, indicating that the bulls are in control.
#4 Hammer: The latest candle is a hammer, which is a bullish reversal candle.
#5 Strong Stoch: The stochastic is currently moving up and the %K line has crossed above the %D line. These are also bullish signs.
#6 Downtrend Broken: As you can see from the weekly chart, the stock was in a downtrend for the past several weeks. This is marked as an orange line in the weekly chart. Currently, the stock has broken out of the downtrend and is consolidating. This is a bullish sign.
Weekly Chart – LKSD
#7 MACD Above Signal Line: The MACD line has crossed above the signal line in the weekly chart. This is a bullish sign as well.
#8 Cup and Handle Pattern: The stock is currently forming a cup and handle pattern in the weekly chart (shown in pink color). The Cup and Handle is a bullish pattern and a breakout from this pattern indicates that the stock may move higher.
#9 Flat MA: The 20-week SMA of the stock is currently flat, indicating that the stock is consolidating at the current levels.
#10 RSI moving up: The RSI is nearing 50 and moving up, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy half the intended quantity of shares of LKSD at the current price of $14.22 and the rest if the stock breaks out above the double bottom pattern at around $18.
TP: Our target prices are $20 and $25 in the next 4-6 months.
SL: To limit risk, place a stop loss below $13.40 (entry at $14.22) and $16.50 (entry at $18). Note that the stop loss is on a closing basis.
Our target potential upside is 38% to 76% in the next 4-6 months.
- Entry at $14.22: For a risk of $0.82, our target rewards are $5.78 and $10.78. This is a nearly 1:7 and 1:13 risk-reward trade.
- Entry at $18: For a risk of $1.5, our target reward (TP#2) is $18. This is a nearly 1:4 risk-reward trade.
In other words, this trade offers 4x to 13x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the IH&S and double bottom pattern with 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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