Peabody Energy Corporation (NYSE: BTU) seems to be gearing up for a surge as per its latest charts. The company is the largest private-sector coal company in the world. Its primary business consists of the mining, sale, and distribution of coal, which is purchased for use in electricity generation and steelmaking.
The stock was also a part of our recent watchlist.
Bullish Indications
#1 Channel Breakout: The daily chart shows that the stock has currently broken out of a downtrend channel. This channel is marked in the chart as pink color lines. This is a possible bullish indication.
BTU – Daily Chart
#2 Trading above MAs: The price is currently above its short-term moving average of 50-day SMA as well as the longer-time moving average of 200-day SMA. This implies a possible bullish bias for the stock.
#3 Bullish ADX and DI: The ADX line has currently moved up from below –DI and +DI lines. The +DI line and the ADX line are also currently above the –DI line. This indicates possible bullishness.
#4 Bullish Stoch: The %K line of the stochastic is currently above the %D line, 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 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 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. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are firmly in control.
BTU – Weekly Chart
#7 MACD above Signal Line: The weekly chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
#8 Bullish ADX and DI: The +DI line and the ADX line are currently above the –DI line in the weekly chart as well, 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 BTU is above the price of around $21.50.
TP: Our target prices are $27 and $31 in the next 3-6 months.
SL: To limit risk, place a stop loss at $18.20. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 26% to 44% in the next 3-6 months.
For a risk of $3.30, the target rewards are $5.50 and $9.50. 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 breakout level. 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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