The global transportation company offering intermodal container leasing and sales, rail leasing and operations, and global logistics services, CAI International Inc. (NYSE: CAI) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 IH&S Breakout: As you can see from the daily chart, the stock has recently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
Daily Chart – CAI
#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 gaining control.
#3 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.
#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 and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has risen above (+DI) and (-DI).
#6 Ascending triangle pattern breakout: The weekly 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 in pink 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.
Weekly Chart – CAI
#7 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart, indicating bullishness.
#8 MACD above Signal Line: In the weekly chart as well, 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, the ideal buy level for CAI is if the stock corrects to a price between $26-$27.
Alternatively, the stock may also be purchased if it trades above previous day’s high, which translates to a price of around $29.70.
TP: Our target prices are $35 and $40 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss at $22.20 (for entry near $26-$27) and $26.20 (for entry near $29.70). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 18% to 51% in the next 4-6 months.
- Entry near $26.50: For a risk of $4.30, the target rewards are $8.50 and $13.50. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $29.70: For a risk of $3.50, the target rewards are $5.30 and $10.30. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x 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
Collect up to 5 dividend checks per week [sponsor]Hi, I'm Tim Plaehn, and I just did the math in my own, real-money portfolio. I'll be collecting 70 dividend checks this quarter. That's nearly 5 per week on average. Automatically… no trading, no options, no work. You don't need a lot of money. You can be retired or near retirement... Either way, I'll show you my #1 plan to quickly collect dividends like clockwork from high-quality, cash-flowing business. Click here to learn how to collect up to 5 dividends a week.