International diversified electric and gas utility holding company, Fortis Inc. (NYSE: FTS) seems to be poised for a price surge after pullback according to its latest charts.
Following are some of the bullish indicators in the charts of this top dividend paying utility stock.
Bullish Indications in the Chart
The overall trend of the stock is up, as it is making higher highs and higher lows on the weekly chart. However, the stock had been correcting for past few weeks. A reversal seems to be on the cards due to following reasons.
[hana-code-insert name=’adsense-article’ /]#1 Good Support Nearby: As you can see from the weekly chart of FTS below, the stock had broken out of a double bottom pattern in March 2016.
After moving upwards, the stock formed a shooting star candlestick pattern, indicating bearishness, and pulled back to the double bottom breakout level again.
From there, it surged ahead to reach the high of $38.24.
The price level at the shooting star pattern is a good resistance-turned-support level.
#2 Support near Fibonacci retracement: On drawing Fibonacci retracement levels on the weekly chart, we can see that the stock has taken support near the 61.8% Fibonacci retracement level of the upmove from $29.13 to $38.24. This has been marked on the chart below. The 50% Fibonacci retracement level is also a good support level and is also near to the current price.
#3 MA crossover: As you can see from the weekly chart, the short-term moving average of 50-week SMA had crossed above the longer-term moving average of 200-week SMA. Such crossovers indicates overall bullishness. The stock is also currently trading above its 200-week SMA and taken support near its 50-week SMA. This indicates that the trend is still up.
#4 Hammer: When checking the daily chart of FTS, we can see that the latest candlestick is a hammer. This shows that there is now an influx of buyers back into the stock and the overall bearishness is slowly weakening. The RSI is also in the oversold levels in the daily chart, which shows that the stock might reverse soon.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy levels for the purchase shares of FTS is from $33.50 to $34.20.
TP: Our target price is $40 and is based on the previous high price.
SL: To limit risk, place a stop loss below $32.80, which is based on the nearest support level of the weekly chart. Note that this stop loss is on a closing basis.
Our target potential upside is 17% – 19% in the next months.
- When entering near $33.50: For a risk of $0.70, our target reward is $6.50. This is a 1:9 risk: reward trade.
- When entering near $34.20: For a risk of $1.4, our target reward is $5.80. This is a 1:4 risk: reward trade.
In other words, this trade offers nearly 4X to 9X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the support levels with 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 its sector.