The American operator of hair salons and the largest such chain in the world with over 10,000 salons, Regis Corporation (NYSE: RGS) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern 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 a stock breaks out from it, it has the potential to move further up.
Daily Chart – RGS
#2 Above MAs: In the daily chart, the stock is currently trading above both 50-day and 200-day SMA. The 50-day SMA has also crossed above the 200-day SMA. This implies that the bulls are currently gaining 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 bullishness.
#4 Bullish RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#5 CCI Moving Up: The CCI indicator value is currently moving up. This indicates possible bullishness.
#6 Unbroken Uptrend: The weekly chart shows that the uptrend of the stock is still unbroken, as it has been forming higher highs and higher lows during the past several months.
Weekly Chart – RGS
#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.
#9 Alligator Awake: William’s Alligator is currently awake up in an upward direction (green line above the red line and blue line) in the weekly chart, and candles have formed above the three lines. This indicates a possible bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for RGS is above $19. But for those with higher risk appetite, you can purchase half the intended quantity of shares of RGS at the current price of $18.57.
TP: Our target prices are $23 and $27 in the next 4-6 months.
SL: To limit risk, place stop-loss at $17.95. Note that the stop loss is on a closing basis.
Our target potential upside is 21% to 45% in the next 4-6 months.
- Entry at $18.57: For a risk of $0.62, our target rewards are $4.43 and $8.43. This is a 1:7 and 1:14 risk-reward trade.
- Entry at $19: For a risk of $1.05, our target rewards are $4.00 and $8.00. This is a 1:4 and 1:8 risk-reward trade.
In other words, this trade offers nearly 4x to 14x 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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