The company that engages in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in the Western Canadian sedimentary basin, Tamarack-Valley-Energy-Ltd (TSE: TVE) seems to be ready for a surge as per its latest charts.
#1 Ascending Triangle Pattern Breakout: TVE’s daily chart shows that the stock had recently formed an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the daily chart in pink color. Currently, the stock has broken out of the ascending triangle pattern, indicating possible bullishness.
#2 Trading Above MAs: The stock is currently trading above both its short-term moving average of 50-day and the long-term moving average of 200-day SMA, which implies that the bulls are currently in control. This is a possible bullish sign.
#4 Bullish ADX and DI: The ADX line is currently moving up from below –DI and +DI lines.
The +DI line, and the ADX line is also above –DI line. All these indicate possible bullishness
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 IH&S Breakout: As you can see from the weekly chart, the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for TVE is if it corrects to price of around $26 to $27.
However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of TVE above yesterday’s high, at around $27.80.
TP: Our target prices are $35 and $40 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $23 (for entry near $26.50) and $24 (for entry near $27.80). Note that this stop loss is on a closing basis.
Our target potential upside is 26% to 51% in the next 3-5 months.
- Entry near $26.50: For a risk of $3.50, the target rewards are $8.50 and $13.50. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $27.80: For a risk of $3.80, the target rewards are $7.20 and $12.20. This is a nearly 1:2 and 1:3 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 with high volume from the ascending 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 its sector.
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