The American multinational investment bank and financial services company headquartered in New York City, Morgan Stanley (NYSE: MS) seems to be ready for a price surge as per its latest charts.
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines.
The breakout from a symmetrical triangle pattern usually signifies the start of a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern, which is a possible bullish sign
#2 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#4 Near support level: There is a resistance-turned-support level for the stock nearby (marked as a pink dotted line).
This seems like a good support area for the stock.
#5 %K above %D: The %K line of the stochastic is currently above the %D line in the daily chart, indicating possible bullishness.
#6 Unbroken Uptrend in Weekly Chart: As evident from the weekly chart, the stock is in an uptrend as it has been making higher highs and higher lows for the past several months. The uptrend line is marked in green color. The stock price is also above the 50-week and 200-week SMA. These are all possible bullish signs.
#7 Flag Pattern Breakout: The stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in purple color in the daily chart. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case. Currently, the stock has broken out of the flag pattern which is a possible bullish sign.
#8 Other Bullish Signs: The weekly chart shows that the MACD line is above the signal line, and the %K line is above the %D line. All these points to a bullish bias for the stock.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of MS at the current price of $48.26.
TP: Our target prices are $55 and $60 in the next 3-6 months.
SL: To limit risk, place stop loss at $44. Note that stop loss is on a closing basis.
Our target potential upside is 14% to 24% in the next 3-6 months. For a risk of $4.26, our target rewards are $6.74 and $11.74. This is a 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern breakout with a 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 sector.
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