The Houston-based company that does pipeline transportation of natural gas, Phillips 66 Partners LP (NYSE: PSXP) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As you can see from the daily chart, PSXP had recently formed a symmetrical triangle pattern. This pattern is shown as pink lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out.
This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. 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 possible bullishness.
Daily Chart – PSXP
#2 MACD above Signal Line: The MACD line (blue color) is currently above the signal line (orange color) in the daily chart, indicating a bullish bias.
[hana-code-insert name=’adsense-article’ /]#3 Above MAs: The stock is currently trading above the 50-day as well as 200-day SMA, indicating that the bulls are currently in control.#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70, while Aroon Down (blue line) is below 30.
This indicates possible bullishness.
#5 IH&S Pattern: The weekly chart shows that the stock was forming an Inverted Head and Shoulders (IH&S) pattern.
This pattern is marked in orange color in the daily chart.
Once the stock breaks out from a bullish pattern like the IH&S pattern, it typically moves higher.
Weekly Chart – PSXP
#6 MACD above Signal Line: The MACD line (blue color) is currently above the signal line (orange color) in the weekly chart as well, indicating possible bullishness.
#7 Bullish RSI: As you can see from the weekly chart, RSI is currently above 50 and moving up, indicating bullishness. The stock is also trading above its 50-week and 200-week SMA, indicating a bullish bias.
#8 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the weekly chart. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of PSXP in two scenarios
- If the stock corrects to the breakout level of the symmetrical triangle pattern at around $51.
- If the stock breaks out of the IH&S pattern at around $54.
TP: Our target prices are $65 and $75 in the next 4-6 months.
SL: To limit risk, place a stop loss at $48.20. Note that this stop loss is on a closing basis.
Our target potential upside is almost 20% to 47% in the next 4-6 months.
- Entry near $51: For a risk of $2.80, our target rewards are $14.00 and $24.00. This is an almost 1:5 and 1:9 risk-reward trade.
- Entry near $54: For a risk of $5.80, our target rewards are $11.00 and $21.00. This is an almost 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 9x 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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