Trade of the Day: Breakout Targets a Double-Digit Run in ZBH Stock

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Zimmer Biomet Holdings Inc (NYSE:ZBH) — Shares of ZBH stock broke out late last month after the health care equipment company reported its Q2 loss narrowed to 16 cents per share compared with a loss of $1 per share a year ago. Adjusted earnings jumped 28% year over year to $2.02 per share on a 65% increase in revenue to $1.93 billion, beating expectations on both the top and bottom line. Management also raised the lower end of its full-year earnings guidance.

Following the positive report, a number of analysts upped their target prices for ZBH stock. UBS raised its price objective from $117 to $132, but maintained its “Hold” rating on shares. S&P Capital IQ Equity Research, which has a “Buy” rating on ZBH stock, increased its target from $137 to $147. The technical target based on the stock’s breakout resides between the two fundamental objectives.

Turning to the chart, we see that following a double-bottom in October (not shown) and February at about $88, ZBH stock consolidated and broke from a “V” formation in March, driving through its 200-day moving average and intermediate resistance line. From March to late May, shares rallied from about $100 to $120 before consolidating again.

On July 11, ZBH stock again broke higher, this time from a shallow cup-and-handle formation. A brief retreat resulted in a pullback to the 50-day moving average, followed by a breakaway gap from about $124 to $126. Since the overall market is currently consolidating its recent gains, traders may be able to buy ZBH stock at the bottom of the breakaway gap.

Look to purchase shares on a pullback to $124 with a trading target of $145 within three months. If successful, this trade will result in a gain of nearly 17%. Support is at the 50-day moving average at $122.

ZBH Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/zimmer-biomet-holdings-inc-zbh-stock-trade-of-the-day/.

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