The Ohio-based global company that develops and produces insulation, roofing, and fiberglass composites, Owens Corning (NYSE: OC) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart of OC, the stock has been forming a falling wedge pattern for the past several weeks. It has taken support at the bottom of the wedge before bouncing back. The stock has currently broken out of the falling wedge pattern, indicating possible bullishness.
Daily Chart – OC
#2 Price above MA: The stock is currently above 50-day SMA, indicating that the bulls have currently gained control.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30.
This indicates possible bullishness.
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color).
This indicates a possible bullish setup.
#5 Bullish RSI: The RSI is above 50 and moving up, indicating possible bullishness.
#6 Broken Downtrend: The weekly chart shows that the stock had broken out of a downtrend.
This downtrend line is marked in purple color in the weekly chart. This is a possible bullish sign.
Weekly Chart – OC
#7 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#8 MACD Above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is also a possible bullish sign.
#9 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. OC has taken support at the 23.6% Fibonacci support level of the upmove, as seen in the weekly chart. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of OC at the current price of $53.03 and the rest if the stock closes above its 200-day SMA at around $56.
TP: Our target prices are $60 and $70 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $49 (for entry near $53.03) and at $54.50 (for entry near $56). Note that the stop loss is on a closing basis.
Our target potential upside is 7% to 32% in the next 3-6 months.
- Entry at $53.03: For a risk of $4.03, our first target reward is $6.97 and the second target reward is $16.89. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry at $56: For a risk of $1.50, our first target reward is $4.00 and the second target reward is $14.00. This is a nearly 1:3 and 1:9 risk-reward trade.
In other words, this trade offers 2x to 9x 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
[hana-code-insert name=’MMPress 2′ /]