The public United States-based corporate services company founded in 2007 as a spin-off from Automatic Data Processing, Broadridge Financial Solutions, Inc. (NYSE: BR) seems to be gearing up for a surge as per its latest charts.
#1 Flag Pattern: As seen from the daily 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 purple 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).
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
The +DI line is also currently above –DI line.
This indicates possible bullishness.
#4 Price above MAs: The stock is currently trading above its 50-day as well as 200-day SMA.
This shows that the bulls are currently in control.
#5 Bullish RSI: The RSI is currently above 50 and moving up, indicating the strength of the current upmove.
#6 Cup and Handle pattern : The weekly chart of BR shows that the stock is forming a cup and handle pattern. This is marked in the chart in pink color. The cup and handle pattern is a consolidation and breakout pattern and a breakout from it would indicate that the stock may move higher in the short term.
#7 %K above %D: The weekly chart shows that the %K line is currently above the %D line, indicating possible bullishness.
#8 Bullish RSI: In the weekly chart as well, the RSI is currently above 50 and moving up, indicating the strength of the current upmove. The stock is also trading above its 50-week as well as 200-week SMA, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy price for BR is above the nearest resistance level, which translates to a price above $125.70.
TP: Our target prices are $137 and $150 in the next 4-6 months.
SL: To limit risk, place a stop loss at $118.00. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 9% to 19% in the next 4-6 months.
For a risk of $7.70, the target rewards are $11.30 and $24.30. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the flag 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 its sector.
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