A triangle pattern has emerged in the chart of CAI International Inc. (CAI). Depending on which way the pattern is broken, a breakout or breakdown could occur.
CAI is a global transportation finance and logistics company. Its container leasing segment owns and leases containers and earns fees for managing container portfolios on behalf of third-party investors.
The company reported its fourth-quarter results in February, where earnings beat the consensus estimate and was the highest ever recorded in its container lease business. CAI is now 100% focused on the container leasing business as it divested its rail business in December and its logistics sales business in August.
As of the most recent quarter, the company had $54 million in cash, compared with $183 million in short-term debt. Its profit margin is high for the industry at 8.6%. Earnings were up 225.9% year over year in the fourth quarter.
The stock is currently trading at a low valuation with a trailing P/E of 11.46 and a forward P/E of 4.87. CAI has shown positive long-term momentum leading to a Momentum Grade of B in our POWR Ratings service.
Take a look at the 1-year chart of CAI below with my added notations:
Chart of CAI provided by TradingView
CAI has created a common chart pattern known as a symmetrical triangle. A down trending resistance combined with an up-trending support forms the triangle pattern (green). Since there is no true way to know which way the stock will break, some traders may wait for the breakout or breakdown before entering a trade.
A trader could enter a long position on a break above the down trending resistance, with a protective stop set under the entry level. However, if the stock were to break below the trend line support, a short trade could be entered with a protective stop above the trend line.
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Christian Tharp, CMT
CAI shares were unchanged in premarket trading Tuesday. Year-to-date, CAI has gained 48.85%, versus a 8.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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