The diversified, closed-end management investment company incorporated in the USA, Eaton Vance Tax-Managed Buy-Write Income (NYSE: ETB) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Double Bottom: The daily chart of ETB shows that the stock has formed a double bottom pattern and broken out of it. This is marked in the chart in orange color. A double bottom pattern is a bullish reversal pattern, and the breakout from this pattern indicates that the stock could possibly move upwards shortly.
Daily Chart – ETB
#2 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
[hana-code-insert name=’adsense-article’ /] #3 MACD above Signal Line: The MACD line (blue line) is currently above the MACD signal line (orange line), indicating bullishness.#4 Above MAs: In the daily chart of ETB, the stock is currently trading above both 50-day and 200-day SMA.
This implies that the bulls are currently in control.
#5 Inverted Hammer: The latest candle in the daily chart is an inverted hammer after a bearish candle.
This is a possible bullish sign.
#6 IH&S breakout in Weekly Chart: As evident from the weekly chart, the stock had broken out of an inverted head and shoulders pattern (marked in orange color) and has been consolidating since then.
This consolidation area is marked as a green rectangle. Once the stock price crosses above the long-term resistance level (marked as purple dotted line), it may move until the top of the consolidation range (rectangle).
Weekly Chart – ETB
#7 Strong RSI: The RSI is above 50 and moving up, indicating that the stock price may move to the upside.
#8 CCI moving up: The CCI is above 150 and moving up, indicating overall bullishness.
#9 Strong Stochastic: The %K line is above the %D line in stochastic, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy price of the stock is if it closes above $16.65. (Marked as a purple dotted line in the weekly chart).
For those with higher risk appetite, you can purchase half the intended quantity of shares of ETB at the current price of $16.43.
TP: Our target prices are $18 and $22 in the next 4-6 months.
SL: To limit risk, place stop-loss at $16.20. Note that stop loss is on a closing basis.
Our target potential upside is nearly 8% to 34% in the next 4-6 months.
- Entry at $16.43: For a risk of $0.23, our target rewards are $1.57 and $5.57. This is a 1:7 and 1:24 risk-reward trade.
- Entry at $16.65: For a risk of $0.45, our target rewards are $1.35 and $5.35. This is a 1:3 and 1:12 risk-reward trade.
In other words, this trade offers nearly 3x to 24x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the double bottom pattern 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.
Happy Trading!
Tara
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