Devon Energy Corporation (NYSE: DVN) seems to be gearing up for a surge as per its latest charts. DVN is an independent energy company that primarily engages in the exploration, development, and production of oil, natural gas, and natural gas liquids in the United States.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently formed 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 pink color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
DVN – Daily Chart
#2 Price above MAs: The price is currently above the 50-day as well as 200-day SMA. This usually indicates a possible bullish bias for the stock.
#3 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.
#4 Bullish ADX and DI: The daily chart shows that the +DI line is above the -DI lines. The ADX line is also currently moving higher from below the -DI and +DI lines. This is a possible bullish sign.
#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 Flag Pattern Breakout: 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 has broken out of the flag pattern, indicating possible bullishness.
DVN – Weekly Chart
#7 Bullish Stoch: The weekly chart shows that the %K line has crossed above the %D line. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy price for DVN is above the price of around $69.70.
TP: Our target prices are $75 and $79 in the next 4-6 months.
SL: To limit risk, place a stop loss below $67. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 8% to 13% in the next 4-6 months.
For a risk of $2.70, the target rewards are $5.30 and $9.30. 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
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