The principal subsidiary of Fifth Third Bancorp, a bank holding company, Fifth Third Bancorp (NASDAQ: FITB) seems to be gearing up for a surge as per its latest charts.
#1 Price above MAs: As you can see from the daily chart, the stock price is above the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This typically implies that the bulls are currently in control.
#2 Bullish Stochastic: The %K line of the stochastic is above the %D line in the daily chart. This indicates a possible bullish bias.
An Ascending Triangle pattern is a bullish pattern.
This is marked on the daily chart in purple color.
The base of the triangle also generally acts a good support level.
#4 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) has crossed above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#5 Bullish ADX and DI: The ADX indicator shows bullishness as (+DI) is greater than (-DI). This points to a possible upmove in the near-term.
#6 IH&S Pattern Breakout: From the weekly chart of FITB, you can see that the stock had recently broken out of an Inverted Head and Shoulders (IH&S) pattern. This is marked in the chart below in orange color. An IH&S pattern is a bullish pattern and breakout from it is usually the sign of a possible upmove.
#7 Downtrend Broken: The weekly chart shows that the stock was in a downtrend during the past few months. Currently, the stock has broken out of the downtrend and have started a new uptrend. This is a possible bullish sign.
#8 MACD Above Signal Line: In the weekly chart as well, the MACD line has crossed above the MACD signal line which is a bullish signal.
#9 Fibonacci Support: Usually, after an up-move, stocks typically retraces to any of the key Fibonacci levels before surging back again. FITB had taken support at the 38.2% Fibonacci support level as seen in the weekly chart. So, this seems like a good area for the stock to bounce upwards.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of FITB at the current price of $28.41.
TP: Our target prices are $32 and $38 in the next 3 to 6 months.
SL: To limit risk, place a stop loss near $26.80. Note that this stop loss is on a closing basis.
Our target potential upside is 13% to 34% in the next 3-6 months. For a risk of $1.61, the target rewards are $3.59 and $9.59. This is a nearly 1:2 and 1:6 risk-reward trade.
In other words, this trade offers nearly 2X 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 breakout level of 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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