NEW YORK (TheStreet) -- Whirlpool (WHR) is beginning to set up as a low-risk buy. The stock's narrow trading range in June is poised to give way to an upside breakout. The bullish action from the homebuilders Friday along with a strong bond bid may provide the spark needed for a breakout.
Whirlpool is testing its early June high at $189.50 at midday. A close above this level would set the stock up well for continued upside next week.
Whirlpool left behind an ominous double top in early March. The stock took a heavy hit in the first week of the month, stabilized for five weeks, then collapsed in late April following a disappointing earnings report. A week later, shares began to test a very strong 200-day moving average. After a 20% fall from its 2015 peak, Whirlpool had dipped into oversold territory just as major support near its 200-day came into play.
Whirlpool mounted a solid recovery off its April/May low. By late May, the rebound ran into heavy supply near the March/early April lows. Shares stalled after bumping up against the $192 resistance area, far short of filling the huge April 28 earnings-inspired breakdown gap.
This month, as volume has continued to contract, Whirlpool has remained in a very tight range just above its 200-day. This basing-type action has created a very low-risk buying opportunity for patient bulls.
Whirlpool's buy zone runs from $188 to $184. If shares continue to base here and begin to attract bullish interest, a healthy rally back up to the earnings breakdown gap at $196.70 would serve as an initial target. A close below the current June low of $182.60 would do a great deal of damage to the basing pattern.Click here to see the below chart in a new window.