The popular American mountain resort company, Vail Resorts, Inc. (NYSE: MTN) seems to be gearing up for a surge as per its latest charts.
#1 Symmetrical Triangle Pattern Breakout: The stock has currently broken out of a Symmetrical Triangle pattern. This is a possible bullish sign. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as orange lines.
#2 Ascending triangle pattern Breakout: The daily chart shows that the stock has currently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. This breakout is a possible bullish sign. The base of the triangle generally acts as a good support level.
This implies that there is a possible bullish bias for the stock.
#4 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color).
This is a possible bullish setup.
#5 Bullish Stochastic: As you can see from the weekly chart, the %K line (blue color) is currently above the %D line (orange color), indicating a bullish bias.
#6 Fibonacci Support: Usually, after an up-move, stocks typically retraces to any of the key Fibonacci levels before surging back again. MTN had taken support at the 38.2% Fibonacci support level as seen in the weekly chart before surging higher. This seems like a possible bullish sign.
#7 Downtrend Broken: The stock has currently broken out of a short-term downtrend as seen in the weekly chart.
#8 Above MAs: In the weekly chart, the stock is currently trading above the 200-week SMA. This implies that the bulls are still in control.
#9 Bullish RSI: The RSI is above 50 and moving up, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the half the intended quantity of shares of MTN at the current price of $237.13 and the rest if the stock crosses above $245.50.
TP: Our target prices are $260 and $280 in the next 3-6 months.
SL: To limit risk, place a stop loss at $223 (for entry near $237.13) and $238 (for entry near $245.50). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 6% to 18% in the next 3-6 months.
- Entry at $237.13: For a risk of $14.13, the target rewards are $22.87 and $42.87. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at $245.50: For a risk of $7.50, the target rewards are $14.50 and $34.50. 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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