Union Pacific Corporation (NYSE: UNP) seems to be poised for a price surge as per its latest charts. The company operates in the railroad business in the United States.
The stock was also a part of our recent watchlist for breakout stocks.
Bullish Indications
#1 Breakout from Consolidation area: The daily chart shows that the stock was consolidating within a price range for the past few days. This area is marked as a pink color rectangle. The stock has now broken out from this consolidation area with high volume and is currently trading above it. The breakout level of this consolidation area typically acts as a good support level.
UNP – 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 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 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.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Uptrend Channel: As you can see from the weekly chart, the stock has been trading within an uptrend channel during the past several months. This is marked in the chart in purple 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.
UNP – Weekly Chart
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, 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 UNP above the price of around $271. Alternatively, you can purchase the shares of UNP if it corrects to the price of around $255.
TP: Our target prices are $285 and $295 (for entry near $271) and $270 and $285 (for entry near $255) in the next 3-6 months.
SL: To limit risk, place stop-loss at $264 (for entry near $271) and $247 (for entry near $255). Note that the stop-loss is on a closing basis.
Our target potential upside is 5% to 12% in the next 3 to 6 months.
- Entry near $271: For a risk of $7.00, our target rewards are $14.00 and $24.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $255: For a risk of $8.00, our target rewards are $15.00 and $30.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x 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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