The American multinational private equity, alternative asset management, and financial services corporation, The Carlyle Group LP (NASDAQ: CG) seems to be ready for a price surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies the start of a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern, which is a possible bullish sign.
Daily Chart – CG
#2 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: The MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#4 %K above %D: The %K line of the stochastic is currently above the %D line in the daily chart, indicating possible bullishness.
#5 Near support level: The stock is currently trading above a strong support level, which is marked as a green dotted line.
This seems like a good support area.
#6 IH&S Pattern Breakout: As you can see from the weekly chart, the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern.
This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
Weekly Chart – CG
#7 Other Bullish Signs: The weekly chart shows that the MACD line is above the signal line, and the %K line is above the %D line, and the price is above both 50-week as well as 200-week SMA. All these points to a bullish bias for the stock.
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 CG at the current price of $20.45. The rest of the shares can be purchased if the stock corrects to the support area at around $19.50 to $19.20.
TP: Our target prices are $25 and $30 in the next 3-6 months.
SL: To limit risk, place stop loss at $17.40. Note that stop loss is on a closing basis.
Our target potential upside is 22% to 56% in the next 3-6 months.
- Entry at $19.20: For a risk of $1.80, our target rewards are $5.80 and $10.80. This is a 1:3 and 1:6 risk-reward trade.
- Entry at $20.45: For a risk of $3.05, our target rewards are $4.55 and $9.55. This is a 1:2 and 1:3 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 from the symmetrical triangle pattern breakout 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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