The Alabama-based bank holding company, which engages in the provision of consumer and commercial banking services, ServisFirst Bancshares, Inc. (NASDAQ: SFBS) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 IH&S Breakout in Daily chart: As you can see from the daily chart of SFBS below, the stock had currently broken out of an Inverted Head and Shoulders (IH&S) pattern with high volume. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and the breakout from it indicates that the stock may move higher in the short term.
Daily Chart – SFBS
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day moving averages, indicating a bullish bias for the stock. The latest candle is also a green Hammer candle, which is a bullish reversal candle.
[hana-code-insert name=’adsense-article’ /]#3 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.
#4 Bullish RSI: The RSI is currently above 50 and moving up, indicating the strength of the current upmove.
#5 Breakout from Consolidation Area: As you can see from the weekly chart, the stock had consolidated for a while before breaking out from the consolidation area and moving up.
This area is marked as a green rectangle. A breakout from a consolidation area is a possible bullish sign.
Weekly Chart – SFBS
#6 Bullish MACD: The weekly chart also shows that the MACD (light blue color) is currently above the MACD signal line (orange color), indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of SFBS in two scenarios
- If the stock crosses above the resistance level of $40
- If the stock corrects to the IH&S breakout level at around $34.50
TP: Our first target price is $45 and the second target price is $50 in the next 3-6 months based on the IH&S pattern breakout.
SL: To limit risk, place a stop loss below $36.70 (for entry near $40) and $31.40 (for entry near $34.50). Note that this stop loss is on a closing basis.
Our target potential upside is almost 13% to 45% in the next 3-6 months.
- Entry near $34.50: For a risk of $3.10, our first target reward is $10.50 and second target reward is $15.50. This is a 1:3 and 1:5 risk-reward trade.
- Entry near $40.00: For a risk of $3.30, our first target reward is $5.00 and second target reward is $10.00. This is a 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the Inverted Head and Shoulders pattern breakout level. 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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