The American provider of transportation and supply chain management products, especially known for its fleet of rental trucks, Ryder System, Inc. (NYSE: R) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart of Ryder Systems, the stock had been forming a falling wedge pattern during the past few weeks. This is marked as pink color lines. The stock has currently broken out of the falling wedge pattern. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
#2 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 potential buy signal.
#3 Bullish ADX: Currently, the ADX line is above –DI line. The +DI line is also above –DI line, indicating bullishness.
#4 RSI Strong: Relative strength index (RSI) is currently above 50 after moving up from oversold levels.
This indicates the strength of the current upmove.
#5 Flag Pattern Breakout: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range.
This is a classic flag pattern and is marked in the chart in pink color.
A flag is a continuation pattern. Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern. This is a possible sign of an upcoming bullish move.
#6: Bullish CCI: In the weekly chart, CCI has crossed above zero and is moving up. This is a bullish sign.
#7 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. Ryder System had taken support at 61.8% Fibonacci support level as seen in the weekly chart. This seems like a good support area.
#8 Rising Stochastic: The %K line has crossed above the %D line. The stochastic is also moving up from below 20. All this indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of R in the following scenarios
- If the stock decreases to the long-term support level of $70. This is marked as a green dotted line in the daily chart.
- If the stock crosses above the long-term resistance line of $76.20. This is marked as an orange dotted line in the daily chart.
TP: Our target prices are $90 and $100 in the next 4-6 months.
SL: To limit risk, place a stop loss near $68.50. Note that the stop loss is on a closing basis.
Our target potential upside is 18% to 43% in the next 4-6 months.
- Entry at $70.00: For a risk of $1.50, our target rewards are $20 and $30. This is a nearly 1:13 and 1:20 risk-reward trade.
- Entry at $76.20: For a risk of $7.70, our target rewards are $13.80 and $23.80. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 20x 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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