The Michigan-based leading global supplier of systems and components for the automotive industry, whose products include rubber and plastic sealing, fuel and brake lines, fluid transfer hoses and anti-vibration systems, Cooper-Standard Holdings Inc. (NYSE: CPS) 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 CPS, 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 – CPS
#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 ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), (+DI) is above (-DI), and ADX is moving up from below (-DI) and (+DI).
#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. The downtrend was also broken near a support area. All these indicate possible bullishness.
Weekly Chart – CPS
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 Bullish RSI: In the weekly chart, the RSI is currently moving up from oversold levels, indicating possible bullishness.
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 CPS at the current price of $46.52 and the rest if the stock closes above $56.
TP: Our target prices are $60 and $80 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $41.50. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 72% in the next 3-6 months.
- Entry at $46.52: For a risk of $5.02, our first target reward is $13.48 and the second target reward is $33.48. This is a nearly 1:3 and 1:7 risk-reward trade.
- Entry at $56: For a risk of $14.50, our target reward (TP#2) is $24. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers 2x 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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