The Brazilian investment management company that offers fixed income, equities, investment funds, and private pension products, as well as offers wealth management and other financial services, XP Inc. (NASDAQ: XP) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout, Retest: The daily chart shows that the stock was trading within a falling wedge pattern during the past few months. This pattern is marked in the daily chart in purple color. The stock had then broken out of the falling wedge pattern and retested it again before moving higher. This is a possible bullish indication.
Daily Chart – XP
#2 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.
#3 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX is moving up from below (-DI) and (+DI).
#5 Bullish Stoch: The Stochastic indicator shows that the %K line is above the %D line, which is a bullish indication.
#6 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. XP had taken support at the 50% Fibonacci support level of the upmove before moving higher again, as seen in the weekly chart. This is a possible bullish sign.
Weekly Chart – XP
#7 Bullish Stoch: The %K line (blue color) is above the %D (orange color) of the stochastic in the weekly chart as well. This is a possible bullish sign.
#8 Bullish RSI: The RSI is currently above 50 and moving higher. This indicates the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of XP above yesterday’s close, which translates to a price of $43.50.
TP: Our target price is $50. In case the stock crosses above $50, it would result in the breakout from an ascending triangle pattern. Then, the second target price would be $57.
SL: To limit risk, place a stop loss below $39.60. Note that this stop loss is on a closing basis.
Our target potential upside is almost 15% to 31% in the next 4-6 months.
For a risk of $3.90, our first target reward is $6.50 and the second target reward is $13.50. This is a nearly 1:2 and 1:4 risk-reward trade.
Overall, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge 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 the sector.
Happy Trading!
— Tara