The global consumer products company offering a broad portfolio of leading brands and focused on driving innovation and providing exceptional customer services, Spectrum Brands Holdings Inc. (NYSE: SPB) seems to be ready for a price surge in the near-term.
#1 Channel Breakout: The daily chart of SPB shows that the stock was trading within a channel for the past few months. This channel is marked on the daily chart in pink color. Currently, the stock has broken out of the channel with high volume. This seems like a possible bullish indication.
#2 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is starting to rise from below both (+DI) and (-DI). These point to a possible upmove in the near-term.
This is a possible bullish setup.
#4 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#5 IH&S Pattern Breakout: The daily chart shows that the stock has been forming an inverted head and shoulders pattern.
This pattern is marked in orange color. A breakout from a bullish pattern like IH&S pattern indicates the possibility of an upmove. Currently, the stock has broken out of the IH&S pattern, indicating possible bullishness.
#6 Double Bottom Pattern: In the weekly chart, we can see that the stock had recently formed a double bottom pattern. This pattern is marked in the chart in pink color. A double bottom pattern is a strong bullish pattern and a breakout from it indicates that the stock may move higher in the short term.
#7 Bullish Stochastic: The %K line is currently above the %D line in the stochastic and moving up. This indicates possible bullishness.
#8 RSI Strong: Relative strength index (RSI) is currently above 50 after moving up from oversold levels in the weekly chart. This indicates the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of SPB at the price of around $61.
TP: Our target prices are $67 and $75 in the next 3-6 months.
SL: To limit risk, place a stop loss at $57.60. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 10% to 23% in the next 3-6 months.
For a risk of $3.40, our first target reward is $6.00 and the second target reward is $14.00. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel breakout level 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 new government rules or regulatory changes in its sector.
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