Last Friday’s major hammer candle, coupled with Monday’s follow-through buying on the S&P 500 chart naturally lead me to look for similar patterns on individual stocks. While in this case the pattern was wide-spread across indices and stocks, not all of them developed the pattern right at key moving averages or trend-lines.
One stock that did so however is KKR & Co (NYSE: KKR). The stock typically behaves well technically, so the textbook behavior it displayed in recent days is not entirely surprising, but certainly welcome to those that follow the charts closely enough.
The rally off the May lows to the September highs retraced by nearly 50% last Friday November 16th. Should that not hold as support, then the next important Fibonacci support level would be 61.80%, which sits at $12.80.
Even more importantly however, last Friday’s low coincided with the 200 day simple moving average, where on the daily chart the stock left a significant bullish hammer candle (like the S&P 500 and many other charts). The combination of a hammer formation at a 200 day moving average makes this stock a great bounce candidate.
Despite the above high probability setup for a long-side try, there are two points of concern I must address; 1) Unlike the S&P 500 and many of its sectors and stocks, KKR & Co (NYSE: KKR) did not have a green follow-through buying day on Monday, which would have further confirmed the bullishness of last Friday’s hammer candle. 2) None of the momentum oscillators that I follow are showing any positive divergence from price. Many of the oscillators are oversold but have not yet started moving back up.
Other than that, the setup is ripe for a trade to the upside.
An entry between $13.90 and $14.10, with a stop at last Friday’s low ($13.60) and a first target between $14.75 and $15 is what I am looking at.