This Trade Targets a 29%-61% Return in the Next 4-6 Months

The financial holding company that has been in existence for more than 141 years, BancorpSouth Bank (NYSE: BXS) seem to be poised for a price surge as per its latest charts.

Bullish Indications

#1 Falling Wedge Breakout: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in blue color. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.

Daily Chart – BSX

#2 Uptrend Channel Support: The stock has been trading within an uptrend channel for the past several months. This channel is marked on the chart in purple color. The stock has recently taken support at the lower end of this uptrend channel and bounced back up again. This lower channel acts as a good support level.

[hana-code-insert name=’adsense-article’ /]#3 MACD Above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.

#4 Above MA: In the daily chart of BXS, the stock is currently trading above both 50-day and 200-day SMA. This implies that the bulls are still in control.

However, the daily chart also shows that the RSI is currently near overbought levels. This points to a possible near-term decline in price before the next upmove.

#5 Unbroken Uptrend in Weekly Chart: As evident from the weekly chart, the stock is in an uptrend as it has been making higher highs and higher lows for the past several months. The stock is also above its 50-week as well as 200-week SMA. These are all bullish signs.

Weekly Chart – BSX

#6 Support At Flag Pattern Breakout Level: The stock was in a strong uptrend, after which it started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. This pattern is marked in purple color. The stock then broke out of the flag pattern and has now taken support near the breakout level. This is a good level of support.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for BSX is if it corrects to the range of $31 to $32. This is marked as an orange rectangle in the daily chart.

TP: Our target prices are $40 and $50 in the next 4-6 months.

SL: To limit risk, place stop-loss at $29.50. Note that the stop loss is on a closing basis.

Our target potential upside is 29% to 61% in the next 4-6 months.

  • Entry at $31: For a risk of $1.5, our target rewards are $9 and $19. This is a 1:6 and 1:13 risk-reward trade.
  • Entry at $32: For a risk of $2.5, our target rewards are $8 and $18. This is a 1:3 and 1:7 risk-reward trade.

In other words, this trade offers nearly 3x to 13x more potential upside than downside.

Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern 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 sector.

Happy Trading!


[hana-code-insert name=’IAlley article’ /]