The company that owns, operates, develops and acquires midstream assets in the Appalachian Basin, Rice Midstream Partners LP (NYSE: RMP) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Moving towards lower channel support: As you can see from the daily chart of RMP, the stock has been trading within a channel during the past several months. RMP has typically taken support at the bottom of the channel before bouncing back. The stock is currently near the lower end of the channel, indicating that it is getting ready for its next move. This is a bullish sign.
Daily Chart – RMP
#2 RSI Near Oversold Levels: Relative strength index (RSI) is said to be oversold when it is near 30 and overbought when it is near 70. Presently, the 14-day RSI reading for RMP is near 36.
[hana-code-insert name=’adsense-article’ /]This indicates that the stock is nearing oversold levels and a possible reversal of the downtrend is imminent.#3 Additional Support: The stock’s daily chart shows that the price is currently near a long-term-support level marked by the pink dotted line.
This indicates that the stock may reverse from current levels soon.
#4 Hammer: The latest candle in daily chart is a hammer, indicating possible bullishness.
#5 Triple Bottom Pattern: The stock is currently forming a triple bottom pattern.
This is marked in orange color in the daily chart. A triple bottom pattern is a bullish pattern and a breakout from its neckline can cause the prices to move higher.
#6 Fibonacci Support: The weekly chart of RMP shows that the stock has currently taken support near the 50% Fibonacci retracement level of the upmove. This seems like a good level to bounce back from.
Weekly Chart – RMP
#7 Near long-term support: The weekly chart of RMP shows that the stock is currently trading near a long-term support level (green dotted line). This is a bullish sign.
#8 Oversold RSI: The RSI is near oversold levels for the stock. This indicates that a possible reversal may be imminent.
#9 MACD above signal line: The MACD line is currently above the signal line, indicating bullishness.
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 RMP at the current price of $17.02 and the rest if the stocks break out from the triple bottom neckline, above $19.70.
TP: Our target prices are $25 and $30 in the next 4-6 months.
SL: To limit risk, place a stop loss at $16.80. Note that the stop loss is on a closing basis.
Our target potential upside is 27% to 76% in the next 4-6 months.
Entry at $17.02: For a risk of $0.22, our first target reward is $7.98 and second target reward is $12.98. This is a 1:36 and 1:59 risk-reward trade.
Entry at $19.70: For a risk of $2.90, our first target reward is $5.30 and second target reward is $10.30. This is nearly a 1:2 and 1:4 risk-reward trade
In other words, this trade offers 2x to 59x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel support with 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!
Tara
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