The holding company of Umpqua Bank that provides commercial and retail banking, and retail brokerage services, Umpqua Holdings Corp (NASDAQ: UMPQ) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in orange color. Currently, the stock has broken out of the downtrend channel with high volume. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
Daily Chart – UMPQ
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA. This is a possible bullish sign.
[hana-code-insert name=’adsense-article’ /]#3 Strong Stoch: The stochastic is currently moving up and the %K line is currently above the %D line.
This usually indicates bullishness.
#4 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 bullish bias.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is moving up from below (-DI) and (+DI).
#6 Bounceback from Support area: The weekly chart shows that the stock has currently bounced back from a support area. This area is marked as a green dotted line. This was the same level at which the stock had previously broken out from a consolidation area (marked as a green rectangle). This is a possible bullish sign.
Weekly Chart – UMPQ
#7 Bullish MACD: The MACD line (blue color) is currently above the MACD signal line (orange color) in the weekly chart as well. This indicates a possible bullish bias.
#8 Symmetrical Triangle Pattern Breakout: The weekly chart shows that the stock has recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the chart as purple lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy levels for UMPQ is either above the resistance level of $18 or if it corrects to the channel breakout level of $16.80.
TP: Our target prices are $24 and $30 in the next 4-6 months.
SL: To limit risk, place stop-loss at $15.70. Note that the stop-loss is on a closing basis.
Our target potential upside is 33% to 79% in the next 4 to 6 months.
- Entry at $16.80: For a risk of $1.10, our target rewards are $7.20 and $13.20. This is a nearly 1:7 and 1:12 risk-reward trade.
- Entry at $18.00: For a risk of $2.30, our target rewards are $6.00 and $12.00. This is a nearly 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 12x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level 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.
Happy Trading!
Tara
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