The American financial services company based in New York City and listed on the Fortune 1000, Jefferies Financial Group Inc. (NYSE: JEF) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern: The daily chart shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. The breakout from an ascending triangle pattern is a strong bullish indication. The breakout level also generally acts as a good support level.
Daily Chart – JEF
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish ADX: The ADX line has moved up from below –DI and +DI lines. The +DI and ADX lines are also currently above –DI line. This indicates possible bullishness.
#5 Flag Pattern: The weekly chart shows that the stock was in a strong uptrend after which it started consolidating and was in a narrow 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 the flag pattern, it typically continues its previous trend (uptrend in this case).
Weekly Chart – JEF
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 Bullish ADX and DI: The weekly chart shows that the ADX line has moved higher from the (+DI) and the (-DI) lines, and the (+DI) and the ADX line are also above the (-DI) lines. The stock is also trading above its 50-week as well as 200-week SMA. All these are possible bullish indications.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of JEF is above the resistance level of $35.00. This is marked as a green color dotted line.
TP: Our target prices are $40 and $45 in the next 4 to 6 months.
SL: To limit risk, place a stop loss of around $31.70. Note that this stop loss is on a closing basis.
Our target potential upside is 14% to 29% in the next 3-5 months.
For a risk of $3.30, the target rewards are $5.00 and $10.00. 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. 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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