The popular family entertainment, amusement park, and attraction company headquartered in Orlando, Florida, SeaWorld Entertainment Inc. (NYSE: SEAS) seems to be ready for a price surge in the near-term.
Bullish Indications
#1 Channel Breakout: The daily chart of SEAS shows that the stock was trading within a channel for the past few months. This channel is marked on the daily chart in pink color. Currently, the stock has broken out of the channel. This seems like a possible bullish indication.
Daily Chart – SEAS
#2 Downtrend Broken: The daily chart shows that the stock has currently broken out of a short-term downtrend. The downtrend line is marked in purple color. This is a bullish sign.
[hana-code-insert name=’adsense-article’ /]#3 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.
#4 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#5%K above %D: The %K line of the stochastic is currently above the %D line, indicating possible bullishness.
#7 Flag Pattern 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). Currently, the stock has broken out of the flag pattern, which is a possible bullish sign.
Weekly Chart – SEAS
#8 Rising Stochastic: The %K line is currently above the %D line in the stochastic of weekly chart as well. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of SEAS at the current price of $31.77.
The rest of the stock can be purchased if the stock corrects to the breakout level of the flag pattern at around $26.
TP: Our target prices are $36 and $42 in the next 3-6 months.
SL: To limit risk, place a stop loss at $21.40 (for entry near $26) and $29 (for entry near $31.77). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 13% to 62% in the next 3-6 months.
- Entry at $31.77: For a risk of $2.77, our first target reward is $4.23 and the second target reward is $10.23. This is a 1:2 and 1:4 risk-reward trade.
- Entry at $26: For a risk of $4.60, our first target reward is $10.00 and the second target reward is $1.6.00. This is a 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 flag pattern breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any new government rules or regulatory changes in its sector.
Happy Trading!
Tara
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