The leading owner of oil and natural gas mineral and royalty interests in more than 92,000 gross producing wells across 28 states, Kimbell Royalty Partners LP (NYSE: KRP) seem to be gearing up for a surge as per its latest charts.
#1 Ascending triangle pattern: KRP’s daily chart shows that the stock has been recently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level. Currently, the stock is near the breakout level of the ascending triangle pattern.
#2 Trading Above MA: The stock is currently trading above its 50-day SMA, which implies that the bulls are currently in control.
#4 MACD above Signal Line: In the daily chart, the MACD line has currently crossed above the MACD signal line which is a possible bullish signal.
#5 Bullish RSI: The RSI is above 50 and moving up, indicating possible bullishness.
#6 IH&S Pattern: From the weekly chart, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart in pink color. An IH&S pattern is a bullish pattern.
A breakout from an IH&S pattern is usually the sign of an upcoming bullish move. Currently, the stock is near the breakout level of the IH&S pattern, indicating a possible bullish bias.
#7 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal.
#8 Bullish RSI: The RSI is currently near 50 and moving up in the weekly chart too, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the recommended buy level is when the stock breaks out of the ascending triangle pattern. This translates to a price of around $18.80.
TP: Our target prices are $22 and $26 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $16.80. Note that this stop loss is on a closing basis.
Our target potential upside is 17% to 38% in the next 4-6 months. For a risk of $2.00, the target rewards are $3.20 and $7.20. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x 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 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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