The American cable television provider and multiple system operator with headquarters in New York City, First Altice USA Inc. (NYSE: ATUS) seems to be getting ready for a surge as per its latest charts.
#1 Ascending triangle pattern: The daily chart of shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in blue color. The breakout from the pattern usually signifies the start of an upmove and the breakout level of the triangle typically acts a good support level.
#2 RSI near oversold: The daily chart shows that RSI is near oversold levels. This implies that the stock may reverse to upside soon.
#3 Support near 50-day SMA: The daily chart shows that there is a good support level for the stock close by, at the 50-day SMA.[hana-code-insert name=’adsense-article’ /]The stock may move up from these levels.
#4 RSI – Price Hidden Bullish Divergence: In the daily chart, there is a hidden bullish divergence between RSI and price.
This is marked as pink dotted lines.
While the price formed a higher low, the RSI formed a lower low.
This is typically considered as a potential buy signal as it indicates underlying strength.
#5 Oversold Stochastic: The stochastic is currently near oversold levels, indicating that the price may reverse soon.
#6 Falling Wedge Breakout in Weekly chart: As you can see from the weekly chart, the stock has recently broken out of a falling wedge pattern. This is marked in the chart in purple color. A falling wedge pattern is a strong bullish pattern and indicates that the stock may move higher in the short term. Typically, a stock corrects back to the breakout level of the falling wedge pattern before resuming its upmove.
#7 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 considered as a potential buy signal.
#8 Bullish RSI: The RSI is moving up from oversold levels, indicating bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of ATUS is if it breaks out of the ascending triangle pattern at around $19.50. But for those with a higher risk appetite, you can buy half the intended quantity of stocks at the current price of $17.98.
TP: Our target prices are $25 and $32 in the next 4-6 months.
SL: To limit risk, place a stop at $16.90. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 39% to 93% in the next 4-6 months.
- Entry at $17.98: For a risk of $1.08, the target rewards are $7.02 and $14.02. This is a nearly 1:7 and 1:13 risk-reward trade.
- Entry at $19.50: For a risk of $1.70, the target rewards are $7.50 and $13.50. This is a nearly 1:4 and 1:8 risk-reward trade.
In other words, this trade offers nearly 4X to 13X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. 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 its sector.
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