The American global aerospace and defense technology company formed by Northrop’s 1994 purchase of Grumman, Northrop Grumman Corporation (NYSE: NOC) seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern: NOC’s daily chart shows that the stock is recently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level. Currently, the stock is near the base of the ascending triangle pattern and looks ready for a breakout.
Daily Chart – NOC
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
[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 bullish bias.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started moved up from below (-DI).
#6 IH&S Pattern: From the weekly chart, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart in orange color. An IH&S pattern is a bullish pattern. A breakout from an IH&S pattern is usually the sign of an upcoming bullish move.
Weekly Chart – NOC
#7 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are still in control.
#8 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level is above the breakout level of the ascending triangle and IH&S pattern. This translates to a price of around $293.
TP: Our target prices are $320 and $340 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $279. Note that this stop loss is on a closing basis.
Our target potential upside is 9% to 16% in the next 4-6 months. For a risk of $14.00, the target rewards are $27.00 and $47.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. 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 its sector.
Happy Trading!
Tara
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