The energy holding company based in New Mexico, PNM Resources Inc. (NYSE: PNM) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: The daily chart shows that the stock had currently broken out an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color lines. A breakout from this pattern typically indicates bullishness. The base of the triangle generally acts as a good support level after the breakout.
Daily Chart – PNM
#2 Trading above MAs: The price is currently above its short-term moving average of 50-day SMA as well as its longer-term moving average of 200-day SMA. This implies a possible bullish bias for the stock.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
#4 Bullish ADX and DI: The ADX line has currently moved from below –DI and +DI lines. The +DI line and the ADX line is also currently above the –DI line. This indicates possible bullishness.
#5 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.
#6 Consolidation Area Breakout: The weekly chart shows that the stock was consolidating within a price range for several weeks. This area is marked as an orange color rectangle. Currently, the stock has broken out of this range, which is a possible bullish indication.
Weekly Chart – PNM
#7 Bullish MACD: In the weekly chart as well, the MACD line (blue color) is currently above the MACD signal line (orange color), indicating overall bullishness.
#8 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for PNM is if the stock corrects to the price of around $45.00 to $47.00. Alternatively, you can purchase half the intended quantity of shares of PNM if it trades above $50.70.
TP: Our target prices are $55 and $60 in the next 3-6 months.
SL: To limit risk, place a stop loss at $40.30 (for entry near $46) and $47.90 (for entry near $50.70). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 9% to 30% in the next 3-6 months.
- Entry near $46: For a risk of $5.70, the target rewards are $9.00 and $14.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $50.70: For a risk of $2.80, the target rewards are $4.30 and $9.30. 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
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