The American multinational mass media corporation that is based in Midtown Manhattan, New York City, Twenty-First Century Fox Inc. (NASDAQ: FOXA) seems to be gearing up for a surge after a slight correction as per its latest charts.
#1 Ascending triangle pattern Breakout: FOXA’s daily chart shows that the stock had broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout level of the ascending triangle pattern generally acts as a good support level.
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#4 Flag Pattern Breakout: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range.
This is a classic flag pattern and is marked in the chart in purple color.
A flag is a continuation pattern.
Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern. This is a possible sign of an upcoming bullish move.
#5 MA Cross: The 50-week SMA of FOXA has crossed above the 200-week SMA. The stock is also trading above both 50-week and 200-week SMA. All these are possible bullish signs.
#6 MACD above Signal Line: In the weekly chart, the MACD line has crossed above the MACD signal line which is a bullish signal.
#7 Bullish Stochastic: The %K (blue) line of stochastic has crossed over the %D (Orange) line. This cross is a possible bullish indication.
In addition, the stock had broken out of a long-term consolidation range (marked as green rectangle in weekly chart) before starting the current upmove. This makes this a strong move.
Note: The stock may correct slightly before resuming its current upmove. This is because there are clear bearish signals for the short-term in the daily and weekly chart. They include
- Daily Chart: Oversold RSI, CCI indicator above +200, parabolic SAR touching the price candle, and %K line moving below the %D line in the stochastic.
- Weekly Chart: The RSI is oversold and CCI is above +200.
This implies that the stock may correct until the breakout level of the ascending triangle pattern (which is a strong support level) before resuming its upmove again.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level is if the stock corrects back to the breakout level of ascending triangle pattern at around $39.
Note: It is not recommended to buy half the intended quantity of the stock at the current levels.
TP: Our target prices are $48 and $55 based on the breakout from Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $36.40. Note that this stop loss is on a closing basis.
Our target potential upside is 23% to 41% in the next 4-6 months. For a risk of $2.60, the target rewards are $9.00 and $16.00. This is a nearly 1:3 and 1:6 risk-reward trade.
In other words, this trade offers nearly 3X to 6X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle breakout level. 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.