The Indiana-based operative builders company, Skyline Champion Corp (NYSE: SKY) seems poised for a price surge according to its latest charts.
#1 Symmetrical Triangle Pattern Breakout: As seen in the daily chart of SKY, a symmetrical triangle pattern has been formed during the past few months. This pattern represents a period of consolidation before the price breaks out. A symmetrical triangle pattern 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 of the pattern occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, indicating possible bullishness.
#2 Above MAs: The stock price is currently above both 50-day and 200-day SMA. This is a bullish sign.
This indicates a possible bullish setup.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates possible bullishness.
#5 Downtrend Broken: The weekly chart of shows that the short-term downtrend of SKY has been broken (marked as a purple line) and the stock is poised for an upmove.
The price is also currently above the 50-week and 200-week SMA, indicating bullishness.
#6 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color), indicating bullishness.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart as well. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of shares of SKY at the current price of $24.80. The rest can be purchased if the stock corrects back to the breakout level of the symmetrical triangle pattern at around $22.
TP: Our target prices are $30 and $35 in the next 4-6 months.
SL: To limit risk, place a stop loss at $19.60 (for entry near $22) and $22.60 (for entry near $24.8). Note that this stop loss is on a closing basis.
Our target potential upside is 20% to 59% in the next 4-6 months.
- Entry at $22.00: For a risk of $2.40, our target rewards are $8.00 and $13. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry at $24.80: For a risk of $2.20, our target rewards are $5.20 and $10.20. This is a nearly 1:2 and 1:5 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.
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