The LA-based company engaged in hydrocarbon exploration in California, California Resources Corp. (NYSE: CRC) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock has been forming a falling wedge pattern for the past few months. This is marked as pink color lines. The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – CRC
#2 Price above MA: The stock is currently trading above its 50-day SMA, indicating that the bulls are presently gaining control.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the daily chart.
This is a possible bullish indication.
#4 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 as a potential buy signal.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and ADX and (+DI) are above (-DI).
ADX has also started moving up from below (-DI) and (+DI) and has currently crossed (-DI).
#6 Near support area: There is a strong support area nearby for the stock, which is marked as a green dotted line. This seems like a possible bullish sign.
#7 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a short-term downtrend. The downtrend line is marked in pink color. This is a possible bullish sign.
Weekly Chart – CRC
#8 MACD above Signal Line: As you can see from the weekly chart as well, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#9 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 Levels: If you want to get in on this trade, you can purchase the half the intended quantity of shares of CRC at the current price of $16.31 and the rest if the stock corrects to the support area of around $14.
TP: Our target prices are $22 and $30 in the next 4-6 months.
SL: To limit risk, place a stop loss below $14.70 (for entry near $16.31) and $11.20 (for entry near $14). Note that the stop loss is on a closing basis.
Our target potential upside is 34% to 114% in the next 4-6 months.
- Entry at $14: For a risk of $2.80, our first target reward is $8.00 and the second target reward is $16. This is a nearly 1:3 and 1:6 risk-reward trade.
- Entry at $16.31: For a risk of $1.60, our first target reward is $5.70 and the second target reward is $13.70. This is a nearly 1:4 and 1:9 risk-reward trade.
In other words, this trade offers 3x to 9x 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 energy sector.
Happy Trading!
Tara
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