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Wendy's Stock Has Upside Potential of 20% Partner Content By Chad Shoop | May 1, 2018 — 12:19 PM EDT
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The Wendy's Company (WEN) not only serves as my favorite quick-stop burger chain, but the stock is forming one of my favorite stock patterns – an ascending triangle.
An ascending triangle is easy to spot. This chart pattern forms when a stock is failing to break out higher and hitting a resistance level, which is shown in red on the chart for Wendy's below, at roughly the same price. However, on the pullbacks, the stock is turning higher at a higher price point than before, creating the green support line on the chart.
Take a look:
Technical chart showing The Wendy's Company (WEN) stock forming an ascending triangleCourtesy of Optuma
Wendy's stock is not only forming an ascending triangle pattern, it is likely about to break out. I know this because of how close the two trendlines have become. Any day now, the stock is either going to break out higher, which is usually the case with ascending triangles, or break lower.
The pivotal moment may be in the fast food company's quarterly earnings report that is set to be announced on May 8, just a week away. Earnings could easily push the stock beyond the resistance level on the chart. If that is the case, we are looking at more than 20% in upside potential from that point.
This is probably why ascending triangles are my favorite – they give an easy-to-define price target. All you do is take the height of the pattern, from the lowest price to highest, and add it to the red resistance line. In this case, that is $3.95, and it brings our price target to $21.70 – 22.85% above the resistance line.
Technical chart measuring the height pattern on The Wendy's Company (WEN) stockCourtesy of Optuma
The bottom line is that Wendy's stock is on the verge of a breakout, and it could begin as soon as next week with its earnings report. The stock is poised to make a big move, and if the move is to the upside, Wendy's has a 20% gain ahead of it. If shares break down lower, we can expect a similar downside scenario, with $3.95 of room to fall.
Read more: Wendy's Stock Has Upside Potential of 20% | Investopedia https://www.investopedia.com/trading/wendys-stock-has-upside-potential-20/#ixzz5RZ2ZccRT
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