The company that owns and operates logistics and marketing assets for crude oil, and intermediate and refined products, Delek Logistics Partners LP (NYSE: DKL) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Descending Triangle Upward Breakout: The stock’s daily chart shows that the stock had broken out of a descending triangle pattern in an upward direction. This is marked on the daily chart in blue color. The upward breakout from a bearish pattern like descending triangle is a good bullish sign.
Daily Chart – DKL
#2 Marubozu Candle: The latest candle during the breakout is a bullish Marubozu, which indicate that the stock has traded strongly in upward direction throughout the session and closed at its high price of the day. This is a bullish sign.
#4 %K above %D: The stochastics show that the %K line is currently above the %D line in the daily chart. This is a bullish sign.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#6 Double Bottom: The stock is currently forming a double bottom pattern. This is marked in the daily chart in pink color. This is a bullish reversal pattern and the breakout from it would indicate that the stock could possibly move upwards.
#7 Downtrend Broken: When checking the weekly chart, we can see that the current downtrend line has been broken and the stock is now moving up.
Weekly Chart – DKL
#8 CCI Moving Up: The CCI is currently moving up above 100 from below -100, indicating possible bullishness.
#9 MACD above Signal Line: In the weekly chart as well, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy half the intended quantity of shares at the current price of $30.30. You can buy the remaining half if the stock corrects to the 200-day SMA of around $29.50.
TP: Our target prices are $35 and $40 in the next 3-5 months.
SL: To limit risk, place a stop loss at $27.60. Note that the stop loss is on a closing basis.
Our target potential upside is almost 15% to 36% in the next 3-5 months.
- Entry at $29.50: For a risk of $1.90, our target rewards are $5.50 and $10.50. This is a 1:3 and 1:6 risk-reward trade.
- Entry at $30.30: For a risk of $2.70, our target rewards are $4.70 and $9.70. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the descending triangle pattern breakout 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 the sector.
Happy trading!
Tara
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