British American Tobacco PLC (NYSE: BTI) seems to be gearing up for a price surge according to its latest charts. British American Tobacco plc is a British multinational company that manufactures and sells cigarettes, tobacco, and other nicotine products.
The stock was also a part of our recent watchlist.
Bullish Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern for the past several months. These are marked as orange color lines. The stock had typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out of the falling wedge pattern and is moving higher, which is a possible bullish sign.
BTI – Daily Chart
#2 Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, indicating that the bulls are currently in control.
#3 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.
#4 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
#5 Symmetrical Triangle Pattern: The weekly chart shows that the stock is currently forming a symmetrical triangle pattern. This is marked in purple color lines. This pattern is usually formed when there is indecision in the price movements and uncertainty among the buyers and sellers. It represents a period of consolidation before the price breaks out or breaks down. Once the stock breaks out of the symmetrical triangle pattern, it usually signifies the start of a new bullish trend.
BTI – Weekly Chart
#6 Price Above MA: The stock is currently trading above its 50-week SMA, indicating that the bulls are slowly gaining control.
#7 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for BTI is above the price of $40.00. However, you can purchase half the intended quantity of shares of BTI above the near-term resistance level of $38.50. These buy levels are marked as green color dotted lines.
TP: Our first target price is $45 and the second target price is $49 in the next 4-6 months.
SL: To limit risk, place a stop loss at $35.00 ( for entry near $38.50) and $37.00 (for entry near $40.00). Note that this stop loss is on a closing basis.
Our target potential upside is almost 12% to 27% in the next 4-6 months.
- Entry near $38.50: For a risk of $3.50, our first target reward is $6.50 and the second target reward is $10.50. This is a 1:2 and 1:3 risk-rewards trade.
- Entry near $40.00: For a risk of $3.00, our first target reward is $5.00 and the second target reward is $9.00. This is a 1:2 and 1:3 risk-rewards 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 the sector.
Happy Trading!
— Tara
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