The company engaged in hydrocarbon exploration and whose assets include Eagle Ford Group and the Permian Basin, SM Energy Co (NYSE: SM) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart of SM, the stock has been forming a falling wedge pattern for the past several months. It has typically taken support at the bottom of the wedge before bouncing back. This pattern is marked in purple color. The stock has currently broken out of the falling wedge pattern. A breakout from the wedge indicates that the stock may move higher.
Daily Chart – SM
#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 the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA.
This usually implies a possible bullish bias for the stock.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, 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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of the prevailing downtrend. This downtrend line is marked in pink color. A breakout from a downtrend is a possible bullish sign.
Weekly Chart – SM
#7 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#8 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#9 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is moving up from below (-DI) and (+DI).
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for SM is above the near-term resistance level of $12.80.
TP: Our target prices are $20 and $25 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $10.20. Note that the stop loss is on a closing basis.
Our target potential upside is 56% to 95% in the next 3-6 months.
For a risk of $2.60, our first target reward is $7.20, and the second target reward is $12.20. This is a nearly 1:3 and 1:5 risk-reward trade.
In other words, this trade offers 3x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with 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
Collect up to 5 dividend checks per week [sponsor]Hi, I'm Tim Plaehn, and I just did the math in my own, real-money portfolio. I'll be collecting 70 dividend checks this quarter. That's nearly 5 per week on average. Automatically… no trading, no options, no work. You don't need a lot of money. You can be retired or near retirement... Either way, I'll show you my #1 plan to quickly collect dividends like clockwork from high-quality, cash-flowing business. Click here to learn how to collect up to 5 dividends a week.