The American multinational corporation that designs and manufactures dispensing equipment for consumer and industrial adhesives, sealants and coatings, Nordson Corporation (NASDAQ: NDSN) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart of NDSN, the stock had been forming a falling wedge pattern during the past few months. This is marked as blue color lines. The stock has currently broken out of the falling wedge pattern. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – NDSN
#2 Double Bottom Pattern: From the daily chart, we can see that the stock had formed a Double Bottom pattern. This is marked in the chart in pink color. The stock is currently consolidating near the double bottom pattern’s neckline. A double bottom pattern is a strong bullish pattern and indicates a possible upmove in the short term.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#4 RSI Strong: Relative strength index (RSI) is currently above 50 after moving up from oversold levels. This indicates the strength of the current upmove.
#5 Above MA: The stock is currently trading above the 50-day SMA. This indicates that the bulls are still in control.
#6 Near Support Level: The stock has currently taken support near the gap support level. This is marked as orange dotted lines. This seems like a good level to bounce upwards.
#7 Bullish Stochastic: Currently, the %K line of the stochastic is above the %D line in the weekly chart, indicating bullishness.
Weekly Chart – NDSN
#8 Flag Pattern Breakout: As seen from the weekly chart, the stock was in a strong uptrend after which it had started consolidating and was in a narrowing range. This is a classic flag pattern and is marked in the chart in blue color. A flag is a continuation pattern. Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern. This is a possible sign of an upcoming bullish move.
#9 Strong RSI: In the weekly chart, the RSI is currently moving up above 50, indicating strength.
#10 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. NDSN had taken support at 78.6% Fibonacci support level as seen in the weekly chart. This seems like a good support area.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of NDSN at the current price of $133.43.
TP: Our target prices are $150 and $160 in the next 3-6 months.
Note: However, in case the stock finds resistance when attempting to close above $140, exit half your holdings at that level.
SL: To limit risk, place a stop loss near $127.25. Note that the stop loss is on a closing basis.
Our target potential upside is 12% to 20% in the next 3-6 months. For a risk of $6.18, our first target reward is $16.57 and second target reward is $26.57. This is a nearly 1:3 and 1:4 risk-reward trade.
In other words, this trade offers 3x to 4x 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 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 energy sector.
Happy Trading!
Tara
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