One of the larger independent commercial banks in California that is chartered by the State of California, Preferred Bank (NASDAQ: PFBC) seems to be gearing up for a surge as per its latest charts.
#1 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This implies that the bulls are currently in control.
#2 Ascending triangle pattern: PFBC’s daily chart shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in blue color. The base of the triangle generally acts as a good support level.[hana-code-insert name=’adsense-article’ /] #3 Strong Stochastic: As you can see from the daily chart, the %K line (blue color) is currently above the %D line (orange color), indicating a bullish bias.
#4 Alligator Waking Up: William’s Alligator is currently waking up in an upward direction (green line above the red line and blue line) and a candle has formed above the three lines.
This indicates a possible bullish bias.
#5 Strong RSI: RSI is currently above 50 and moving up, indicating bullishness.
#6 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.
#7 Bullish bias in Weekly Chart: There are various bullish signs in the weekly chart.
- The stock’s parabolic SAR indicator is currently below the price.
- The MACD indicator shows that the MACD line is about to move above the signal line.
- The RSI is strong and moving up.
- The stochastic shows that %K is above %D.
- The price is above both 50-week and 200-week SMA.
- There is an ascending triangle pattern being formed in the weekly chart.
All these indicate bullishness for the stock.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PFBC in two scenarios
- If the stock breaks out of the ascending triangle pattern. This translates to a daily close above $67.50.
- If the stock corrects to the lower end of the ascending triangle pattern, at around $62.20.
TP: Our target prices based on the Ascending Triangle pattern are $78 and $90 in the next 3-6 months.
SL: To limit risk, place a stop loss at $62.20 (for $67.50 entry) and $59.40 (for $62.20 entry). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 15% to 45% in the next 3-6 months.
- Entry at $62.20: For a risk of $2.80, the target rewards are $15.80 and $27.80. This is a nearly 1:6 and 1:10 risk-reward trade.
- Entry at $67.50: For a risk of $5.30, the target rewards are $10.50 and $22.50. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2X to 10X 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 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.
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