Patterson-UTI Energy, Inc. (NASDAQ: PTEN) seems to be poised for a price surge as per its latest charts. The company provides land drilling and pressure pumping services, directional drilling, rental equipment, and technology to clients in the United States and western Canada.
The stock was also a part of our recent watchlist for breakout stocks.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily 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 orange 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.
PTEN – Daily Chart
#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, indicating that the bulls are still in control. This is a positive indication.
#3 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#4 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.
#5 Bullish RSI: In the daily chart, the RSI is currently above 50 and moving higher. This is a possible bullish sign.
#6 Uptrend Channel Breakout: As you can see from the weekly chart, the stock has been trading within an uptrend channel for the past several months. This is marked in the chart in pink color lines. Once a stock breaks out from a channel, it has the potential to move further up. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are still in control.
PTEN – Weekly Chart
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PTEN above the price of around $17.20.
TP: Our target prices are $22 and $25 in the next 3-6 months.
SL: To limit risk, place stop-loss at $14.60. Note that the stop-loss is on a closing basis.
Our target potential upside is 28% to 45% in the next 3 to 6 months.
For a risk of $2.60, our target rewards are $4.80 and $7.80. 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 from the trend channel with a high volume. 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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