The well-known American multinational financial services corporation headquartered in New York City, American Express Company (NYSE: AXP) seems to be gearing up for a surge after a slight correction as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: Amex’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.
Daily Chart – Amex
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
[hana-code-insert name=’adsense-article’ /] #4 Bullish Chaikin: The Chaikin Oscillator is currently above zero which is a bullish sign.#5 Bullish ADX and DI: The ADX line has currently crossed above –DI line. The +DI line is also above –DI line, indicating bullishness.
#6 Pennant 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 pennant pattern and is marked in the chart in purple color. A pennant 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 pennant pattern. This is a possible sign of an upcoming bullish move.
Weekly Chart – Amex
#7 Above MAs: The stock is also trading above both 50-week and 200-week SMA. This is also a bullish sign.
#8 MACD above Signal Line: In the weekly chart, the MACD line is currently above the MACD signal line which is a bullish signal.
#9 Other Bullish indications: The %K (blue) line of stochastic has recently crossed over the %D (Orange) line. This cross is a possible bullish indication. The Aroon indicator also shows bullishness as the Aroon Up is currently above 70.
Note: The stock may correct slightly before resuming its current upmove. This is because there are possible bearish signals for the short-term in the daily chart. They include RSI near oversold levels and oversold stochastic with %K line moving below the %D line.
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 the ascending triangle pattern at around $102.
TP: Our target prices are $115 and $125 based on the breakout from Ascending Triangle pattern.
SL: To limit risk, place a stop loss near the 200-day SMA at around $98. Note that this stop loss is on a closing basis.
Our target potential upside is 13% to 23% in the next 4-6 months. For a risk of $4, the target rewards are $13 and $23. 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.
Happy Trading!
Tara
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