The Brazil-based company engaged in the provision of passenger transportation services, Azul SA (NYSE: AZUL) seems to be ready for an upmove after a possible pullback according to its latest charts.
#1 Double Bottom Breakout in Daily Chart: As you can see from the daily chart of AZUL below, the stock has recently broken out of a Double bottom pattern. A Double bottom pattern is a bullish reversal pattern. A breakout from it indicates that the stock could possibly move upwards. Typically, stocks retrace to the breakout level of the double bottom pattern again before continuing its upmove.
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the signal line (orange color). This is a possible bullish setup.
This is a bullish sign.
#4 Bullish Stochastic: The daily chart shows that the %K line is above the %D line in the stochastic.
This indicates that an upmove may be imminent.
#5 Downtrend Broken: The daily, as well as the weekly chart, shows that the stock has broken out the downtrend line (marked in purple color).
This is a possible bullish sign.
#6 Support Level: There is a long-term support level for the stock nearby, which is marked as a green dotted line. The stock could bounce back from this resistance-turned-support level.
#7 MACD above Signal Line: The weekly chart also shows that the MACD line (blue color) is above the signal line (orange color). This is also near oversold levels. This is a possible bullish sign.
#8 Strong RSI: The RSI is above 50 and steadily moving up. This indicates that the price may move higher.
#9 %K above %D in Stochastic: The %K line is above the %D line in the stochastic in the weekly chart as well. This indicates bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of AZUL between $20.90 (breakout level of the double bottom pattern) and $22.66 (CMP).
TP: Our target prices are $28 and $35 in the next 4 to 6 months.
SL: To limit risk, place a stop loss below $19.50. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 23% to 67% in the next 4-6 months.
- When entering near $20.90: For a risk of $1.40, our target rewards are $7.10 and $14.10. This is a 1:5 and 1:10 risk-reward trade.
- When entering near $22.66: For a risk of $3.16, our target rewards are $5.34 and $12.34. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2X to 10X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks with high volume from the double bottom pattern and long-term support level. 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 its sector.