The New Jersey-based electric services company, Suburban Propane Partners LP (NYSE: SPH) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: SPH’s daily chart shows that the stock has been 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 has broken out of the ascending triangle pattern, which is usually a bullish sign.
Daily Chart – SPH
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#4 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 possible bullishness.
#5 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines in the daily chart.
The +DI line is also currently above –DI line. This indicates possible bullishness.
#6 IH&S Pattern: From the daily 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 orange 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 has broken out of the IH&S pattern, indicating a possible bullish bias.
Weekly Chart – SPH
#7 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines in the weekly chart. The +DI line is also currently above –DI line. This indicates possible bullishness.
#8 MACD above Signal Line: In the weekly chart, the MACD line is above the MACD signal line which is a bullish signal.
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 SPH at the current price of $24.63. The rest of the shares can be purchased if the stock corrects to the breakout level of the ascending triangle pattern at around $23.50.
TP: Our target prices are $32 and $40 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $21.80. Note that this stop loss is on a closing basis.
Our target potential upside is 30% to 70% in the next 4-6 months.
- Entry at $23.50: For a risk of $1.70, the target rewards are $8.50 and $16.50. This is a nearly 1:5 and 1:10 risk-reward trade.
- Entry at $24.63: For a risk of $2.83, the target rewards are $7.37 and $15.37. This is a nearly 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 10x 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.
Happy Trading!
Tara
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