The Zürich, Switzerland-based company that provides a range of insurance and reinsurance products and services to clients around the world, Chubb Ltd (NYSE: CB) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: The daily chart of CB shows that the stock has 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.
Daily Chart – CB
#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.
[hana-code-insert name=’adsense-article’ /]#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.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
However, it is currently near overbought levels, indicating that a correction may be imminent before the next upmove.
#5 Double Bottom Breakout: The daily chart shows that the stock has recently broken out from a double bottom pattern.
This is marked in orange color in the chart.
A double bottom is a bullish pattern and a breakout from it indicates that the stock may move higher in the near-term.
#6 Downtrend Broken: The weekly chart shows that the stock’s short-term downtrend has been broken. This downtrend line is marked in purple color. A break from a downtrend is usually a possible bullish sign.
Weekly Chart – CB
#7 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#8 MACD Above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is also a possible bullish sign.
#9 Strong RSI: The RSI is currently above 50 and moving up, indicating the strength of the current upmove.
#10 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of CB is if the stock corrects back to the breakout level of the ascending triangle pattern. This translates to a price of around $135. Alternatively, you can also purchase the shares of CB if it closes above the resistance level of $140.
TP: Our target prices are $150 and $160 in the next 4 to 6 months.
SL: To limit risk, place a stop loss around $131.90 (for entry near $135) and $136.80 (for entry near $140). Note that this stop loss is on a closing basis.
Our target potential upside is 7% to 19% in the next 3-5 months.
- Entry at $135: For a risk of $3.10, the target rewards are $15.00 and $25.00. This is a nearly 1:5 and 1:8 risk-reward trade.
- Entry at $140: For a risk of $3.20, the target rewards are $10.00 and $20.00. This is a nearly 1:3 and 1:6 risk-reward trade.
In other words, this trade offers nearly 3x to 8x 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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