This Stock Has A Strong Risk-Reward Potential

The bank holding company for Southside Bank, Southside Bancshares, Inc. (NASDAQ: SBSI) is a community-focused financial institution that offers a range of financial services to individuals, businesses, municipal entities, and nonprofit organizations in the communities. The stock seems to be ready for an upmove in the next 4-6 months as per its latest charts.

Bullish Indications

#1 Channel Support: As you can see from the daily chart of SBSI below, the stock has been trading inside an uptrend channel for the past few months. This is marked in the daily chart in purple color. Currently, the stock has taken support at the lower end of the channel and has started moving up.

Daily Chart SBSI

#2 Falling Wedge Pattern: The daily chart shows that the stock has been forming a falling wedge pattern within the uptrend channel during the past few weeks. This is marked as green color in the daily chart. The stock has now taken support near the bottom of this falling wedge pattern.

[hana-code-insert name=’adsense-article’ /]The price can potentially reach the top of the falling wedge and breakout of the pattern in the near term.

#3 RSI Moving up: The daily chart shows that the RSI has taken support near 40 and started moving upwards. This is a bullish sign.

#4 Ascending Triangle: The weekly chart shows that the stock has taken support at the bottom of the Ascending Triangle pattern.

An Ascending Triangle pattern is a bullish pattern and is marked in the chart in pink lines. The stock has historically taken support near the bottom of ascending triangle pattern before moving higher again.

Weekly Chart SBSI

Note: The stock was in a strong uptrend for the past several months. Then the stock started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. (flagpole is marked in the daily chart in pink color) Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case.

#5 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. Southside Bancshares, Inc. had taken support at 78.6% Fibonacci support level, of the upmove from $18.30 to $38.40, as seen in the weekly chart.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, you can purchase half the shares of at the current price of $34.18 and the rest once the stock breaks out from the falling wedge pattern, at $34.25.

TP: Our first target price is the top of the channel in the daily chart. This translates to around $38. The second target price is $46 based on the ascending triangle pattern in the weekly chart.

SL: To limit risk, place a stop loss at $32.80. Note that this stop loss is on a closing basis.

Our target potential upside is 11% to 35% in the next 4-6 months.

  • Entry at $34.18: For a risk of $1.38, our target rewards are $3.82 and $11.82.
  • Entry at $34.25: For a risk of $1.45, our target rewards are $3.75 and $11.75.

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 from the channel support and ascending 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 its sector.

Happy Trading!


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