The oil drilling company that operates land-based drilling rigs in the United States and Canada, Patterson-UTI Energy, Inc. (NASDAQ: PTEN) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock has been forming a falling wedge pattern during the past few months. This is marked as purple color lines. The stock is now trading near the top of this falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it usually indicates that the stock may move higher in the short term.
Daily Chart – PTEN
#2 Bullish Stoch: In the daily chart, the %K line is above the %D line in the stochastic. It is also now moving up after reaching oversold levels. All this indicate possible bullishness.
[hana-code-insert name=’adsense-article’ /]#3 Bullish RSI: The value of RSI is near 50 and is moving up from oversold levels.
This indicates bullishness.
#4 Bullish CCI: CCI is now moving up from below -200 to above -50.
This indicates possible bullish bias.
#5 Oversold RSI: The RSI is near oversold levels, indicating that the stock may reverse to upside soon.
Weekly Chart – PTEN
#6 MACD Above Signal Line: The MACD line (orange color) is currently above the MACD Signal Line (blue color), indicating possible bullishness.
#7 Reversal Candle: The latest candle is a doji, which is a reversal candle.
#8 Near long-term support: There is a long-term support level for the stock nearby, which is marked as an orange dotted line in the weekly chart.
#9 RSI -Price Bullish Divergence: There is a bullish divergence between RSI and price in the weekly chart. While the price formed a lower low, the RSI formed to a higher low. This is marked as blue dotted lines. This is also a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PTEN if it breaks out of the long-term resistance level of $18. This is marked in green dotted line in the daily chart.
TP: Our target prices are $25 and $35 in the next 4-6 months.
SL: To limit risk, place a stop loss below $16.80. Note that the stop loss is on a closing basis.
Our target potential upside is 39% to 95% in the next 4-6 months. For a risk of $1.20, our target rewards are $7.00 and $17.00. This is a nearly 1:6 and 1:14 risk-reward trade.
In other words, this trade offers 6x to 14x 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
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