3 Bullish Chart Patterns with Good Fundamentals
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In technical analysis, classic chart patterns have varying degrees of success in predicting where a stock is headed. Several studies have shown that certain patterns have historically been right 80% of the time or more. This may sound fairly foolproof, but the glass half empty investor would point out the 20% chance of being dreadfully wrong.
Because no one technical signal serves as the perfect crystal ball, most investors used a combination of factors to validate their research. A less common approach is to identify stocks whose technical and fundamental characteristics point in the same direction to enhance the likelihood of picking winners.
Here we highlight three stocks that have recently formed bullish chart patterns—and have underlying catalysts that can help the patterns come to fruition.
Will Fifth Third Stock Keep Going Up?
Late last week, the early stages of a symmetrical continuation triangle pattern formed on Fifth Third Bancorp's (NASDAQ:FITB) daily chart. The symmetrical triangle pattern happens when a pair of trend lines converge at approximately the same slope. This shows that a stock is in consolidation mode and a breakout may be forthcoming in a triangular shape.
In the case of Fifth Third, the stock could be headed to the $42.40 to $43.40 range over the next few weeks. If the pattern holds true to form, this could result in a 13% run, which would be no small feat for a historically low volatility bank stock.
Turning to the fundamental analysis, Fifth Third Bank has cracked the top 15 U.S. banks by asset size. In fact, with more than $200 billion in assets, it is now larger than Morgan Stanley Bank, Citizens Bank, and KeyBank. This added muscle gives it the scale to derive the kind of operating efficiencies and profits that smaller regional banks typically can't.
Last quarter, Fifth Third's blew away consensus earnings expectations by 28% largely due to lower loan loss provisions in an improving economy. On April 20th, the commercial and retail bank will report first-quarter results. Ongoing improvement in credit metrics and strength in the asset management business could fuel another strong earnings beat and send the stock into the low $40's.
Why is Lazard Stock Doing Well?
Staying in the financial sector, Lazard (NYSE:LAZ) has had three different technical patterns form this year all of the bullish variety. Most recently, an ascending continuation triangle formed on the daily chart. This pattern is a close cousin to the symmetrical triangle with the difference being the trends lines converge at different slopes.
The pattern has taken nearly a full trading year to form but its payoff could unfold in a matter of a few months. The breakout target for Lazard shares is $52.75 to $54.40 which at the midpoint represents 16% upside in the intermediate-term. This would surpass the stock's return for all of 2019 and 2020 combined.
What's the fundamental catalyst that can help get it there? As one of the world's top financial advisory firms, Lazard is benefitting from a strong mergers and acquisitions (M&A) environment. Last quarter its core financial advisory business booked 29% revenue growth.
This strength is likely to have continued in the first quarter thanks to increased business activity around the world. This translates into higher demand for Lazard's capital raising, capital structuring, restructuring, and debt negotiation services.
On the heels of record financial advisory revenues in Q4, Lazard could deliver an even stronger Q1 result considering the economy has since strengthened giving businesses greater comfort to hire and spend. If it does, it could not only fulfill the technical pattern but be off to challenge its $60 record high from February 2018.
Is Moderna Stock Headed for $200?
Moving over to a far more risky industry in biotechnology, Moderna (NASDAQ:MRNA) also has a bullish technical picture that may appeal to the risk-taking investor.
Moderna's daily chart closed out last week with a bullish continuation wedge pattern. Also similar to the previous two patterns, a wedge pattern forms when two trend lines converge. It is considered one of the more potent formations. The wedge-shaped trend lines suggest that a reversal is underway.
In the case of Moderna, the upside associated with the pattern is substantial. The wedge forecasts that the broader uptrend will resume and that Moderna could climb as high as $210 by early June 2021. Given how volatile the stock has been in recent months, a 50% late spring run could certainly be in the cards.
The company is of course best known for its COVID-19 vaccine and in the near-term that is what will continue to drive the stock price. In addition to the vaccine currently being administered in the U.S. and several overseas markets, Moderna is developing a next-gen COVID-19 vaccine. It hopes the product can not only be a single shot vaccine but solve the storage conundrum by being able to be stored in regular refrigerators. It is also studying yet another COVID-19 vaccine that is better equipped to protect against the new coronavirus variants.
So, the positive headlines could very well keep rolling in for Moderna and help strengthen its leadership position during the pandemic. In the meantime, the technical and fundamentals both seem to agree that this will soon be a $200 stock.
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