Medical imaging and aviation security technology company Analogic Corporation (NASDAQ: ALOG) seems to ready for a big price surge in the near-term.
There are quite a few bullish indicators in the charts of ALOG.
#1 Strong Support: As you can see from the daily chart of ALOG below, the stock had taken support at its 50-day SMA and is now currently above it.
#2 Cup and Handle pattern: The daily chart of ALOG shows that a cup and handle pattern is being currently formed.
This is marked in the chart below.
The cup and handle pattern is a consolidation and breakout pattern.
In this case, the stock has been forming the pattern over a period of one year.
This shows that the pattern is very strong.
The cup was formed between December 2016 and November 2017. Currently, the handle is being formed and the price is at the lower channel of the handle.
#3 MA Crossover: The daily chart of ALOG shows that the short-term moving average of 20-day SMA has crossed above the longer-term moving average of 50-day SMA. Such crossovers indicate a possible upcoming bullish movement.
#4 RSI above 50: The RSI is currently above 50, indicating strength.
#5 Double Bottom pattern: The weekly chart of ALOG shows a double bottom pattern was formed.
#6 RSI-Price Positive Divergence: In the weekly chart of ALOG, there was a positive RSI-Price divergence during the formation of the double bottom pattern. While the stock price was making lower lows, the RSI made a higher low. This is marked in the weekly chart as blue dotted lines. This indicates bullishness.
#7 MA crossover: In the weekly chart of ALOG, the shorter-term moving average has crossed above longer-term moving average, indicating bullishness.
#8 Doji: The previous weekly candle was a doji after a big red candle. This indicates a possible change of trend.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half of the intended quantity of shares of ALOG at the current price level of $84.75.
Purchase the remaining quantity once the stock breaks out of the top of the ‘cup and handle’ pattern marked in the daily chart. This translates to roughly $90.
TP: Our target price is $115. This is based on the breakout level from the cup and handle pattern.
SL: To limit risk, place a stop loss at $78.20, which is based on the weekly chart. Note that this stop loss is on a closing basis.
When Entering at $84.75
Our target potential upside is nearly 36% in the next 6 months. For a risk of $6.55, our target reward is $30.25. In other words, this trade offers nearly 4.5x more potential upside than downside.
When Entering at $90
Our target potential upside is nearly 28% in the next 6 months. For a risk of $11.80, our target reward is $20.5. In other words, this trade offers nearly 2x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the cup and handle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any new government rules or regulatory changes in its sector.
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