The bank holding company operating in various areas in Texas and central Oklahoma and headquartered in Houston, Texas, Prosperity Bancshares, Inc. (NYSE: PB) seem to be poised for a price surge as per its latest charts.

Bullish Indications

#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up.

Daily Chart – PB

#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 is a possible bullish sign.

#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.

This indicates possible bullishness.

#4 Above Support: As shown in the daily chart, there is support nearby for the stock, which is marked as an orange dotted line.

The stock is currently trading above this support.

This looks like a good area for the stock to bounce back upwards during corrections.

#5 Double Bottom: As seen in the weekly chart, the stock is currently forming a double bottom pattern.

This is marked in the weekly chart in orange color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards.

Weekly Chart – PB

#6 MACD Above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a bullish bias.

#7 Bullish RSI: The weekly chart shows that the RSI is moving up above 50 after reaching near oversold

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, you can purchase the shares of PB in two scenarios

  • If the stock breaks out above the nearest level of $79.
  • If the stock corrects to the support level of $71.

TP: Our target prices are $84 and $90 in the next 4-6 months.

SL: To limit risk, place stop-loss at $75.80 (for entry near $79) and $67.30 (for entry near $71). Note that the stop-loss is on a closing basis.

Our target potential upside is 6% to 27% in the next 4 to 6 months.

  • Entry at $71: For a risk of $3.70, our target rewards are $13.00 and $19.00. This is a 1:4 and 1:5 risk-reward trade.
  • Entry at $79: For a risk of $3.20, our target rewards are $5.00 and $11.00. This is a nearly 1:2 and 1:3 risk-reward trade.

In other words, this trade offers nearly 2x to 5x more potential upside than downside.

Risks to Consider

The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level 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.

Happy Trading!

Tara

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