The company that owns and operates logistics and marketing assets for crude oil, and intermediate and refined products, Delek Logistics Partners LP (NYSE: DKL) seem poised for a price surge according to its latest charts.
#1 Symmetrical Triangle Pattern: A symmetrical triangle pattern is being currently formed in the daily chart as shown below. This pattern is usually formed when there is an indecision in the price movements and there is uncertainty among the buyers and sellers. This chart pattern represents a period of consolidation before the price breaks out or breaks down. If a breakout from the upper trend line occurs, it signifies the start of a new bullish trend.
#2 Oversold RSI: The daily chart of DKL shows that RSI is oversold. This implies that the selling momentum is weakening and the trend reversal might be around the corner. This is yet another bullish sign.
#4 Support at Fibonacci Level: The weekly chart of DKL shows that the stock had been on an uptrend from October 2016 and formed a top in January 2017.
Since then, the stock has been correcting. It is now near the 50% Fibonacci retracement level of this move.
Stocks usually retrace to any of the key Fibonacci levels before resuming its upmove.
So, this 50% retracement level seems like a good support area.
#5 Cup and Handle Pattern: The weekly chart of DKL shows that a cup and handle pattern is being formed for the stock. This is marked in the chart in purple color. A cup and handle pattern is a consolidation and breakout pattern. If the stock breaks out of the cup and handle pattern with high volume, the stock can possibly give high returns. Currently, the stock is near the lower end of the handle, making it a good buy point.
#6 Resistance-Turned-Support Level in the Weekly chart: As seen from the weekly chart, there is a long-term resistance-turned-support level for the stock which is marked in green dotted line.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy the stock at the current price of $28.75.
TP: Our first target price is $35 and the second target price is $50 in the next 4-6 months.
SL: To limit risk, place a stop loss at $26.40. Note that this stop loss is on a closing basis.
Our target potential upside is almost 22% to 74% in the next 4-6 months.
For a risk of $2.35, our first target reward is $6.25 and the second target reward is $21.25. In other words, this trade offers nearly 3x to 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. 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 sector.