Trading Recommendation – KBH, SIVB, MAIN, CNQ, PCSB and INGR

The US stock markets continued their upward grind and the index recorded an eighth consecutive weekly close in the green. A new life-time is a sign of strength, which should be purchased. Hence, we have selected a few stocks that have a good risk to reward ratio and can be purchased even at these levels.

Key points

  1. The S&P 500 continues its march higher
  2. Some stocks are likely to participate if the uptrend continues
  3. Buy KBH, SIVB, MAIN, CNQ, PCSB and INGR

However, the S&P 500 is getting into the overbought zone. Therefore, we recommend trading with only about 50% of the usual allocation size.

KBH – Buy 28, Stop Loss (SL) 26, Target 33 and higher

Weekly chart

After peaking in 2005, the stock plunged during the financial crisis. It has struggled to rally since then and has been languishing below the $29 levels for more than a decade. It has formed a large base. Once the stock breaks out of the overhead resistance, it is likely to start a new uptrend. While the stock looks like a good bet even for the medium-term, we shall stick to the short-term targets. Traders who want to hold the stock for the medium-term can do so by trailing their stops higher.

Daily chart

The stock rallied from February to July of this year, post which, it entered into a correction that ended on September 22. The stock, then, quickly rallied from a low of $20.68 to $27.67 in about 20 days. Since then, the stock has been consolidating in a tight range between $26.21 on the lower end and $27.77 on the upper end. Once the stock breaks out of the upper end of the range, we expect it to rally to $33.2 levels in the short-term. Though $29 might act as a resistance, we believe that it is unlikely to hold for long.

Therefore, we recommend a long position on a breakout and close above the range at $28. The initial stop loss can be placed at $26. Our target objective is $33 and higher. Traders can book 50% profits at $33 and trail the remaining position higher.

SIVB – Buy 225, SL 215, Target 252

Weekly chart

The stock is in an uptrend and has been a multibagger since bottoming in 2009. The stock more than doubled from end-June 2016 to end-February 2017. Thereafter, the stock entered a period of consolidation, during which it only experienced a shallow correction. The stock resumed its uptrend in the week before, which should carry it to $274 in the medium-term. However, we want to trade it for the short-term, therefore, let’s look at the entry and exit levels.

Daily chart

The stock gapped up to new lifetime highs on October 27. We like the way it has been consolidating near the highs since then. This shows that the bulls are not in a hurry to book profits even at these levels. If the bulls manage to breakout to new highs, we expect the stock to regain momentum and quickly rally towards its short-term target objective of $252. Therefore, we recommend a buy at $225 with a stop loss of $215.

MAIN – Buy 41.1, SL 39.6, Target 43.86

Weekly chart

The stock bottomed out in end-2008 and rallied sharply till 2013. Thereafter, the stock spent the next three years in consolidation. An attempt to breakdown of the range failed in early-2016, after which the stock resumed its uptrend.

Daily chart

The stock has formed an ascending triangle pattern on the daily chart. $40.5 had been acting as a stiff resistance on the upside. However, on Friday, the stock broke out and closed above the overhead resistance. We now expect the stock to resume its uptrend and rally towards its pattern target of $43.86. We can buy the stock at $41.1, above the intraday highs of Friday and keep a stop loss of $39.6.

CNQ – Buy 36.02, SL 32, Target 41

Weekly chart

The stock topped out at $53.93 in early-June 2008. Thereafter, the stock plunged during the financial crisis. Though the stock pulled back from the lows, it could never breakout to new highs. It continued to make lower highs and then in early-2016, it again plunged to the lows. Since then, the stock has recovered smartly and is on its way to the downtrend line, which is likely to act as a stiff resistance once again.

Daily chart

After a smart recovery from the lows in early-2016, the stock entered a period of consolidation. It remained range bound between $27.52 to $34.3 for about one and a half years. It broke out and closed above the range on Monday of last week. Thereafter, it continued to rally for the next four days. We believe that the stock has started a new uptrend that is likely to carry it to $41 levels. Therefore, we recommend a buy at the current levels of $36.02 with a stop loss of $32.

PCSB – Buy 19.31, SL 18.5, Target 21.2

Daily chart

The stock has a trading history of just a few months, therefore, we are not analysing the weekly charts.

The chart shows that the stock rallies and then consolidates for the next few weeks. Following this pattern, the stock bottomed on September 07 at $16.5 and rallied to $19.2 by September 29. Since then, the stock has been consolidating in a small range of $18.56 to $19.20. It broke out of the range on Thursday of last week and extended its gains on Friday. It should now rally towards its target of $21.2. Hence, we recommend a buy at the current levels with a stop loss of $18.5.

INGR – Buy 130, SL 124, Target 139

Weekly chart

The stock has been in a steady uptrend since bottoming out in 2009. It entered into a correction in September of last year. Since then, it remained within the range of $113 to $129. However, last week, the stock broke out of the overhead resistance and is now likely to resume its uptrend.

Daily chart

The stock had been range bound between $113 and $126 since February of this year. On November 01, it broke out of the range and also above the overhead resistance. Though it did not close strong, the bears could not push it back into the range as the buying continued on the following two days. We believe that the stock has completed its consolidation and is likely to resume its uptrend. It has a short-term pattern target of $139, which is close to the lifetime highs. We, therefore, recommend a buy at the current levels of $130 with a stop loss of $124. There is a small resistance at $135, therefore, we recommend raising the stop loss to breakeven once the stock reaches $135.

Featured image courtesy of Shutterstock. 

Author:
Rakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.