The pipeline transportation of natural gas company, BP Midstream Partners LP (NYSE: BPMP) seem to be poised for a price surge as per its latest charts.
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, BPMP has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in purple color lines. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up. Currently, the stock has broken out of the falling wedge pattern, indicating possible bullishness.
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the signal line (orange color). This is a possible bullish setup.
This implies that the bulls are currently in control.
These MAs also acts as a good support level.
#4 Ascending Triangle Pattern Breakout: The daily charts also show that an ascending triangle pattern breakout has occurred.
This is marked in pink color lines. An Ascending Triangle pattern is a bullish pattern.
Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the pattern, which is a bullish sign.
#5 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a short-term downtrend. The downtrend line is marked in blue color. This is a possible bullish sign.
#6 Bullish RSI: The RSI is currently above 50 and moving up in the weekly chart, indicating possible bullishness.
#7 MACD above Signal Line: As you can see from the weekly chart as well, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of BPMP in two scenarios
- If the stock closes above the high of the latest daily candle, translating to a price of around $16.40.
- If the stock corrects to the breakout level of the ascending triangle pattern at around $15.40.
TP: Our target prices are $20 and $25 in the next 3-5 months.
SL: To limit risk, place stop-loss at $14.50. Note that the stop loss is on a closing basis.
Our target potential upside is 21% to 62% in the next 3-5 months.
- Entry at $15.40: For a risk of $0.90, our target rewards are $4.60 and $9.60. This is an almost 1:5 and 1:11 risk-reward trade.
- Entry at $16.40: For a risk of $1.90, our target rewards are $3.60 and $8.60. This is an almost 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 11x 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 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.
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