The oil pipeline and terminal company based in Denver, Colorado, TransMontaigne Partners L.P. (NYSE: TLP) shows signs of an upcoming price surge based on its latest charts.
#1 IH&S Pattern in Daily chart: As you can see from the daily chart of TLP below, over the past several weeks, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern. An IH&S pattern is a strong bullish pattern and is marked in orange color in the chart below. After the completion of the IH&S pattern, the stock may move higher in the short term.
#2 Near Support Level: The stock has currently taken support near its 50-day SMA. There is also a long-term support level nearby, marked as green dotted lines. These all seem like good levels for the stock to bounce back from.
[hana-code-insert name=’adsense-article’ /]#3 RSI near 50: In the daily chart of TLP, RSI is near 50, indicating strength.
#4 CCI above -100: In the daily chart, the readings of CCI is moving up from below -100.
This means that it can potentially start an uptrend.
#5 Weekly IH&S: The weekly chart of TLP also shows that an Inverted Head and Shoulders pattern is being formed currently.
This is marked in the chart below.
After an upmove, the stock corrected and then has been consolidating. After that, TLP has been forming an IH&S pattern on the weekly chart. The completion of this pattern would indicate that the earlier uptrend may resume.
#6 MACD Above Signal Line: As you can see from the weekly chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#7 Near Demand Area: After an uptrend, the stock corrected to near $34.50 on March 5, 2018. From there, the stock bounced back to reach near $42. The stock corrected again to $34.50 level on the week ending May 7, 2018, by forming a long-tailed candle. This makes it a demand area and is marked as a purple dotted line. This level seems like a good support level.
#8 Strong RSI: The RSI is near 50, indicating strength.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the shares of TLP at the current price of $37.60 and the rest in either of these scenarios:
- If the stock corrects to the demand area in the weekly chart (purple color line). This translates to around $34.50.
- If the stock moves above $42.
TP: Our target prices $50 and $60.
SL: To limit risk, place a stop loss below $32.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 33%-60% in the next 4-6 months.
- Entering at $34.50: For a risk of $2.00, our target rewards are $15.50 and $25.50. This is a nearly 1:7 and 1:12 Risk-Reward trade.
- Entering at $37.60: For a risk of $5.10, our target rewards are $12.40 and $22.40. This is a nearly 1: 2 and 1:4 Risk-Reward trade.
- Entering at $42.00: For a risk of $9.50, our target reward (TP#2) is $18. This is a nearly 1:2 Risk-Reward trade.
In other words, this trade offers nearly 2x to 12x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the current levels before completing the formation of the Inverted Head and Shoulders 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.
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