The American multinational investment bank and financial services company headquartered in New York City, Morgan Stanley (NYSE: MS) seems to be poised for a price surge as per its latest charts.
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few weeks. This is marked in the daily chart in purple color. Falling Wedge Patter is a bullish pattern. Once the stock moves up and breaks out from it, it has the potential to move further up.
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 a green color line in the daily chart) Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case.
#2 Bullish Candle: The latest candle on the daily chart of MS is a Hammer, which is a bullish candle.[hana-code-insert name=’adsense-article’ /] #3 Oversold RSI: The RSI is near oversold levels in the daily chart, indicating that a bullish reversal may be imminent.
#4 Near long-term support level: There is a long-term support level for the stock nearby (marked as an orange dotted line).
This seems like a good support area for the stock.
#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 price is also above the 200-week SMA. This is also a possible bullish sign.
#6 RSI near oversold: The RSI is near oversold levels, indicating that the stock may reverse soon.
#7 Near demand area: The stock is currently near a demand area. This area is marked as green ellipse 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 intended quantity of shares of MS at the current price of $49.92 and the rest if the stock corrects to the long-term support level near $47.50.
TP: Our target prices are $65 and $75 in the next 4-6 months.
SL: To limit risk, place stop loss at $45.50. Note that stop loss is on a closing basis.
Our target potential upside is 30% to 58% in the next 4-6 months.
- Entry at $47.50: For a risk of $4.42, our target rewards are $15.08 and $25.08. This is a 1:3 and 1:6 risk-reward trade.
- Entry at $49.92: For a risk of $2, our target rewards are $17.50 and $27.50. This is a 1:9 and 1:14 risk-reward trade.
In other words, this trade offers nearly 3x to 14x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the long-term support level 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.
Tara[hana-code-insert name=’MMPress’ /]