The pipeline transportation of crude oil company that deals with oil pipeline transportation, marketing, and storage business in the United States, liquefied petroleum gas business in Canada, and natural gas storage business in Michigan and Louisiana, Plains All American Pipeline, L.P. (NYSE: PAA) seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of 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 daily chart as purple color lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
Daily Chart – PAA
#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 usually implies a possible bullish bias for the stock.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line and the ADX line is greater than (-DI), and ADX has started to move up from below (-DI) and (+DI).
#4 Bullish MACD: The MACD line is above the MACD signal line in the daily chart, indicating 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 Double Bottom Pattern: The weekly chart shows that the stock has been forming a double bottom pattern, which is marked in pink color. Once a breakout from a bullish pattern like a double bottom pattern occurs, the stock usually moves higher.
Weekly Chart – PAA
#7 Other bullish signs: The weekly chart shows a bullish stochastic, and bullish ADX and DI. All these are bullish indications.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for PAA is above the neckline of the double bottom pattern, which translates to a price of around $11.70. Alternatively, you can purchase half the intended quantity of shares of PAA above yesterday’s high, at a price of around $8.80.
TP: Our target prices are $15 and $18 in the next 3-6 months.
SL: To limit risk, place a stop loss at $5.70 (for entry near $8.80) and $9.50 (for entry near $11.70). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 28% to 105% in the next 3-6 months.
- Entry near $8.80: For a risk of $3.10, the target rewards are $6.20 and $9.20. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $11.70: For a risk of $2.20, our target rewards are $3.30 and $6.30. 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 symmetrical 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
3 stocks to Change Your Life [sponsor]Brace yourself... because I'm about to flip everything you thought you know about dividend investing on its head. I'm going to show you how you can achieve 101% yields from dividends in just a few years. Best of all, it's as easy as buying 3 stocks and clicking a few buttons. And if you invest in these 3 stocks, you'll never have to worry about a bear market again. Folks it's time to take control of your retirement. Let me show you the way. Click here to discover how 20,000 other retirees are earning 101% yields from their dividends.