The American multinational food manufacturing company headquartered in Battle Creek, Michigan, Kellogg Company (NYSE: K) 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 Kellogg, the stock has been forming a falling wedge pattern for the past several weeks. It has typically taken support at the bottom of the wedge before bouncing back. This pattern is marked in pink color. The stock has currently broken out of the falling wedge pattern, indicating possible bullishness.
Daily Chart – K
#2 Price above MA: The stock is currently above the 50-day SMA, indicating that the bulls are currently in control.
#3 %K above %D: The %K line of the stochastic is currently above the %D line in the daily chart.
The stoch is also moving up from oversold levels.
All these indicate possible bullishness.
#4 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines.
The +DI line is also currently above –DI line.
This indicates possible bullishness.
#5 Stoch– Price bullish divergence: There is a bullish divergence between Stoch and price as seen in the weekly chart below. While the price formed a lower low, the Stoch formed a higher low. This is marked as pink dotted lines in the weekly chart. This is a possible bullish sign.
Weekly Chart – K
#6 MACD Above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color). This usually indicates bullishness.
#7 Bullish CCI: The CCI indicator value is currently moving up. This indicates 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 Kellogg at the current price of $56.67. The rest of the shares can be purchased if the stock crosses above the resistance level of around $60.
TP: Our target prices are $65 and $75 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $53.10 (for entry near $56.67) and $57.30 (for entry near $60). Note that the stop loss is on a closing basis.
Our target potential upside is 8% to 32% in the next 3-6 months.
- Entry near $56.67: For a risk of $3.57, our first target reward is $8.33 and the second target reward is $18.33. This is a nearly 1:2 and 1:5 risk-reward trade.
- Entry near $60: For a risk of $2.70, our first target reward is $5.00 and the second target reward is $15.00. This is a nearly 1:2 and 1:6 risk-reward trade.
In other words, this trade offers 2x to 6x 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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