The well-known American fashion designer and manufacturer of popular brands like Fossil, Relic, Abacus, Michele Watch, Skagen Denmark, Misfit, WSI, and Zodiac Watches, Fossil Group Inc. (NASDAQ: FOSL) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock had been forming a falling wedge pattern during the past few weeks. This is marked in pink color lines. The stock is currently near the top 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 – FOSL
#2 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.
[hana-code-insert name=’adsense-article’ /] #3 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again.Fossil Inc. has currently taken support at 50% Fibonacci support level as seen in the daily chart.
The stock is also trading just above its 200-day SMA.
So, this seems like a good area for the stock to bounce upwards.
#4 Rising Stochastic: The %K line is currently above the %D line. The stochastic is also moving up from below 20. All this indicates possible bullishness.
#5 RSI Strong: Relative strength index (RSI) is currently near 50 after moving up from oversold levels in the weekly chart. This indicates the strength of the current upmove.
Weekly Chart – FOSL
#5 Flag Pattern: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic flag pattern and is marked in the chart in purple 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).
#6: Bullish CCI: In the weekly chart, CCI is moving up after reaching oversold levels. This is a bullish sign.
#7 Oversold Stochastic: The %K line of the stochastic has currently crossed above the %D line. The stochastic is also near oversold levels. All this indicates that the stock may reverse to upside soon.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of FOSL if it breaks out above the falling wedge pattern at around $22.20.
TP: Our target prices are $30 and $40 in the next 4-6 months.
SL: To limit risk, place a stop loss near $19.50. Note that the stop loss is on a closing basis.
Our target potential upside is 35% to 80% in the next 4-6 months. For a risk of $2.70, our target rewards are $7.80 and $17.80. This is a nearly 1:3 and 1:7 risk-reward trade.
In other words, this trade offers 3x to 7x 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 sector.
Happy Trading!
Tara
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