The company that sells individual life insurance and annuity products principally under the consumer brand name of Farm Bureau Financial Services, FBL Financial Group (NYSE: FFG) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
[hana-code-insert name=’adsense-article’ /]#1 Falling Wedge Breakout: As you can see from the daily chart of FFG, the stock has been forming a falling wedge pattern for the past few months.
This is marked as pink color lines.
The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge.
A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
#2 RSI Strong: Relative strength index (RSI) is currently above 50.
This indicates the strength of the current upmove.
Daily Chart – FFG
#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 as a potential buy signal.
#4 Double Bottom Pattern: In the weekly chart, we can see that the stock is forming a double bottom pattern. This pattern is shown in the figure in pink color. The stock has taken support at the second bottom and is currently moving up. A double bottom pattern is a bullish reversal pattern, indicating that the stock could possibly move upwards shortly.
Weekly Chart – FFG
#5 Bullish RSI: The Relative strength index (RSI) is moving up from oversold levels and is now above 50 in the weekly chart. This shows the strength of the current upmove.
#6 Bullish Stoch: The %K line is above the %D line of the stochastic and it has moved from oversold, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for FFG is if it moves above the resistance level of $70. But for those with higher risk appetite, you can purchase half the intended quantity of shares of FFG at the current price of $65.06.
TP: Our target prices are $75 and $80 in the next 4-6 months.
SL: To limit risk, place a stop loss below $62 (entry at $65.06) and $67 (entry at $65.06). Note that the stop loss is on a closing basis.
Our target potential upside is 7% to 23% in the next 4-6 months.
- Entry at $65.06: For a risk of $3.06, our first target reward is $9.94 and the second target reward is $14.94. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry at $70: For a risk of $3.00, our first target reward is $5.00 and the second target reward is $10.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with 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 energy sector.
Happy Trading!
Tara
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