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Trade of the Day: Manitowoc Company (MTW)

Despite lackluster Q3 earnings, Manitowoc Company Inc (MTW) is up more than 10% in the last month — twice as much as the broad market — and did especially well in the last few sessions after analysts at Citigroup Inc (C) initiated coverage and Jefferies Group LLC (JEF) raised their rating to “buy.” The Wisconsin-based industrials firm divides its operations into two segments: cranes and other lifting equipment for construction, and food-service equipment.

At the close on Friday, Nov. 21, the Profit Scanner powered by Recognia identified two short-term bullish patterns in MTW’s chart, as well as an intermediate term bullish pattern: the Head-and-Shoulders Bottom. The latter carries a target of $27.25–$28.50, for a gain of 27%–33% from the Friday close ($21.31), and is expected to complete within 39 trading days.

A Head-and-Shoulders Bottom implies that the stock has completed an accumulation period at the bottom of a major downtrend; now that the price has broken higher through resistance, traders can expect a reversal to a new uptrend.

As demonstrated in Manitowoc’s chart (below), the pattern is created by three successive price declines following a significant downtrend. The lowest low (head) is in the middle, flanked by two higher lows (shoulders) at roughly the same level. Volume is highest as the stock makes the first two declines, then diminishes through the right shoulder.

Trade of the Day: Manitowoc Company Inc (MTW)

In the Head-and-Shoulders Bottom, the reversal higher is confirmed by a volume surge as the stock closes above the neckline drawn between the two highs. That’s just what occurred on Friday on significantly above-average volume of 3.5 million shares traded.

Traders should note that there is technical resistance just below the Profit Scanner’s target range, at $27.06 — but even that would result in a nice gain of nearly 27% from the Friday close. Support lies at $20.97, and the Profit Scanner places a tight stop for Manitowoc at a close below $20.50.

Those looking for a bullish options trade should consider the MTW Jan. $22 calls. Currently trading at around $1.00, this option has open interest of 698 contracts and should enjoy a substantial gain if Manitowoc reaches the Profit Scanner’s expected $27.25–$28.50 target within the 39 trading days.

Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.


Article printed from InvestorPlace Media, https://investorplace.com/2014/11/trade-day-manitowoc-company-mtw-3/.

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