The Florida-based construction engineering company, Dycom Industries, Inc. (NYSE: DY) seem poised for a price surge according to its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The stock has currently broken out of a symmetrical triangle pattern as seen in the daily chart. A symmetrical triangle pattern represents a period of consolidation before the price breaks out and is typically formed when there is an indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
Daily Chart – DY
#2 Bullish Candle: The latest candle on the daily chart is a long green candlestick with high volume. This indicates that buyers controlled the price of the stock from the opening bell to the close of the day, and is considered to be a possible bullish sign.
[hana-code-insert name=’adsense-article’ /]#3 Above MA: The stock price is currently above 50-day SMA.
This is usually a bullish sign.
#4 %K above %D: In the daily chart, the %K line (light blue color) has crossed above the %D line (orange color) in the stochastics.
Stochastics is also moving up from oversold territory. This is a possible bullish sign.
#5 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 bullish.
#6 Support at Fibonacci Level: The weekly chart of DY shows that the stock had been on an uptrend after which it has been correcting. It has now taken support near the 23.6% Fibonacci retracement level of this move and is moving upwards. Stocks usually retrace to any of the key Fibonacci levels before resuming its upmove. So, this 23.6% retracement level seems like a good support area.
Weekly Chart – DY
#7 Downtrend Broken: The weekly chart shows that the recent downtrend has been broken (marked as a blue line) and the stock is poised for an upmove.
#8 %K above %D: In the weekly chart, the %K line (light blue color) is above the %D line (orange color) in the stochastics. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of DY at the current price of $57.05.
TP: Our target prices are $70 and $80 in the next 4-6 months.
SL: To limit risk, place a stop loss at $48.60. Note that this stop loss is on a closing basis.
Our target potential upside is almost 23% to 40% in the next 4-6 months. For a risk of $8.45, our target rewards are $12.95 and $22.95. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical 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 the sector.
Happy Trading!
Tara
[hana-code-insert name=’MMPress 2′ /]