The American technology-based manufacturer based in El Segundo, California, Aerojet Rocketdyne Holdings Inc. (NYSE: AJRD) seem poised for a price surge according to its latest charts.
#1 Symmetrical Triangle Pattern Breakout: A symmetrical triangle pattern has been formed in the daily chart as shown below. This is marked in purple color lines. This pattern is usually formed when there is an indecision in the price movements and uncertainty among the buyers and sellers. It represents a period of consolidation before the price breaks out or breaks down. Currently, the stock has broken out of the symmetrical triangle pattern with high volume. This usually signifies the start of a new bullish trend.
#2 Bullish ADX and DI: The ADX indicator in the daily chart shows bullishness because (+DI) is greater than (-DI), and ADX and (+DI) are above (-DI).
#4 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color).
This is a possible bullish setup.
#5 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#6 Cup and Handle Pattern: The weekly chart of AJRD shows that a cup and handle pattern. This is marked in the chart in purple color. A cup and handle pattern is a consolidation and breakout pattern. Once the stock breaks out of the cup and handle pattern with high volume, it usually gives high returns. Currently, the stock has broken out of the cup and handle pattern, indicating possible bullishness.
#7 Other positive indications: The weekly chart also shows many positive indications. The price is currently above the 50-week and 200-week MAs, stochastic is bullish, RSI is strong, and CCI also indicates bullishness. All these points to a possible upmove in the near-term.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy half the intended quantity of the stock at the current price of $35.32.The other half can be purchased if the stock closes above $37.50.
TP: Our first target price is $45 and the second target price is $55 in the next 4-6 months.
SL: To limit risk, place a stop loss at $31.10. Note that this stop loss is on a closing basis.
Our target potential upside is almost 27% to 55% in the next 4-6 months.
Entry at $35.32: For a risk of $4.22, our first target reward is $9.68 and the second target reward is $19.68. This is a 1:2 and 1: 5 risk-rewards trade.
Entry at $37.50: For a risk of $6.40, our second target reward is $17.50. This is a 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 5x 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.