The well-known American mass media corporation focused on commercial broadcasting, publishing, and television production, CBS Corporation (NYSE: CBS) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Uptrend Channel: The daily chart of CBS shows that the stock has been trading within an uptrend channel for the past few months. This channel is marked in the daily chart in purple color. Currently, the stock is moving towards the upper rail of this channel after taking support at the lower rail. This is a possible bullish sign.
Daily Chart – CBS
#2 Symmetrical Triangle Pattern Breakout: A symmetrical triangle pattern is seen in the daily chart. This pattern is shown as pink lines. It represents a period of consolidation before the price breaks out and is typically formed when there is an indecision in the price movements and uncertainty among the buyers and sellers.
[hana-code-insert name=’adsense-article’ /]Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend.Currently, the stock has broken out of the symmetrical triangle pattern, indicating bullishness.
#3 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#4 Bullish RSI: The RSI is currently moving up after reaching oversold levels. This indicates that the stock may move higher.
#5 %K above %D in Stochastics: The stochastics oscillator shows that the %K (blue) line is currently above the %D (orange) line. This indicates possible bullishness.
#6 MACD above Signal Line: As you can see from the daily and weekly chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#7 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. CBS had taken support at the 38.2% Fibonacci support level of the upmove, as seen from the weekly chart. This seems like a good level to bounce back upwards. The price is also above the 50-week and 200-week SMA, indicating that the bulls are now in control.
Weekly Chart – CBS
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates bullishness.
#9 Flag Breakout: As you can see from the weekly chart, 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).
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of shares of CBS at the current price of $57.92. You can purchase the rest of the shares once the stock crosses above the resistance level of $60.70.
TP: Our target prices are $65 and $80 in the next 4-6 months.
SL: To limit risk, place a stop loss at $54.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 12% to 38% in the next 4-6 months.
- Entry at $57.92: For a risk of $3.42, our target rewards are $7.08 and $22.08. This is an almost 1:2 and 1:6 risk-reward trade.
- Entry at $60.70: For a risk of $6.20, our target reward (TP#2) is $19.30. This is an almost 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the lower rail of the uptrend channel. 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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