Morgan Stanley (NYSE: MS) seems to be getting ready for a price bump as per the latest charts. Morgan Stanley provides various financial products and services to corporations, governments, financial institutions, and individuals in the Americas, Europe, the Middle East, Africa, and Asia. The company operates through Institutional Securities, Wealth Management, and Investment Management segments.
Bullish Indications
#1 Consolidation Area Breakout: The daily chart shows that the stock was trading within a consolidation area for the past several days. This is marked in the daily chart as a pink color rectangle. Currently, the stock looks poised for a breakout from the consolidation area. Once a stock breaks out from a consolidation area, it usually moves higher.
MS – Daily Chart
#2 Above MA: The stock is currently trading above its 200-day SMA. This indicates an overall bullishness of the stock.
#3 Bullish Stoch: The %K (blue) line of stochastic is currently above the %D (Orange) line in the daily chart, and is also moving higher from oversold levels. This is a possible bullish indication.
#4 Bullish RSI: The RSI is moving higher from oversold levels, and is also currently near 50, indicating bullishness.
#5 Flag Pattern: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic flag pattern and is marked in the chart in purple color. A flag is a continuation pattern. Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock looks poised for a breakout from the flag pattern, indicating bullishness.
MS – Weekly Chart
#6 Price Above MAs: In the weekly chart, the stock is trading above its 50-week and 200-week SMA. This indicates that the bulls currently have an upper hand.
#7 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for MS is above the price of around $105.90. However, you can purchase half the intended quantity of shares of MS above the price of $99.70.
TP: Our target prices are $110 and $115 in the next 3-5 months.
SL: To limit risk, place a stop loss below $103.50 (for entry near $105.90) and $97 (for entry near $99.70). Note that this stop loss is on a closing basis.
Our target potential upside is almost 4% to 10% in the next 3-5 months.
- Entry near $99.70: For a risk of $2.70, our target rewards are $5.30 and $10.30. This is almost 1:2 and 1:4 risk-reward trade.
- Entry near $105.90: For a risk of $2.40, our target rewards are $4.10 and $9.10. This is almost 1:2 and 1:4 risk-reward trade.
In other words, 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 flag 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
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