This Stock Is Ready To Surge and Offers A Good Risk-Reward Trade

January 4, 2018
By

One of America’s largest electric and natural gas delivery holding company, WEC Energy Group Inc. (NYSE: WEC) seems to be poised for a price surge as per its latest charts.

There are quite a few bullish indicators in WEC’s charts.

Bullish Indications
#1 Trend line Support: As you can see from the daily chart of WEC below, the stock has been regularly taking support at its trend line (shown in pink color) before surging ahead. After taking support at the trend line on 22nd December, the stock has again retested the trend line yesterday and taken support there. This indicates a possible bullish move.

#2 Doji: The latest candlestick in the daily chart is a Doji. This indicates indecisiveness between buyers and sellers and could mean a possible reversal to the upside.

#3 RSI-Price Positive Divergence: In the daily chart of WEC, there is a positive divergence between price and Relative Strength Index (RSI).

While the stock’s price is making lower lows, the RSI is making higher lows.

This is called as a positive divergence and is marked on the chart as blue dotted lines.

This implies that price might start moving upwards.

The RSI is also near the oversold level, further indicating that the stock has been oversold and the price may reverse to the upside.

#4 Uptrend Unbroken: From the weekly chart of WEC, it is evident that the stock is currently on an uptrend since the past few years as the price is making higher highs and higher lows. This uptrend remains strong and unbroken, indicating that the bulls are currently in control.

#5 Ascending Triangle Breakout: In the weekly chart of WEC, we can see that the stock had been consolidating inside an ascending triangle pattern (marked in purple color in the chart). WEC finally broke out of this ascending triangle pattern on the week ending October 16, 2017. After a few weeks, it has now corrected back to the breakout level which should now act as a support.

#6 RSI Double Bottom: The RSI is currently near 50 on the weekly chart of WEC. As you can see, RSI has formed a triple bottom pattern at this level. This indicates that the stock may start moving up from this level.

Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of WEC at the current price level of $65.54.

TP: Our first target price (TP#1) for short-term is the previous high price of around $70. Our second target price (TP#2) for longer-term is based on the ascending triangle pattern and is around $75.

SL: To limit risk, place a short-term stop loss at $65.10, which is below the low of the doji candlestick in the daily chart. If you plan to hold until TP#2, set the stop loss at $62.30 which is below the previous pivot low. These are marked in the chart above. Note that stop loss is on a closing basis.

For Short-term Target Price (TP#1)
Our target potential upside is 6.8% in the next 3-4 months. For a risk of $0.44, our target reward is $4.46. In other words, this trade offers nearly 10x more potential upside than downside.

For Longer-term Target Price (TP#2)
Our target potential upside is 14.43% in the next 6 months. For a risk of $3.24, our target reward is $9.46. In other words, this trade offers nearly 3x more potential upside than downside.

Risks to Consider
The stock may reverse its overall trend if it breaks down from the breakout level of ascending triangle with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the energy sector.

Good Trading!
Tara

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