The American aviation holding company which provides air cargo transportation and related services to air carriers and other companies, Air Transport Services Group Inc. (NASDAQ: ATSG) seems to be poised for a price surge according to its charts.
#1 Symmetrical Triangle Pattern: The daily charts shows that a symmetrical triangle pattern is being formed for the stock. This is marked in purple color. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is an indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
#2 Double Bottom: The stock is currently forming a double bottom pattern in the daily chart. This is marked in the chart in orange color. A double bottom is a bullish reversal pattern and the breakout from it would indicate that the stock could possibly move upwards.[hana-code-insert name=’adsense-article’ /] #3 Oversold RSI: The RSI is near oversold levels, indicating that the price may move higher soon.
#4 Flag Pattern: As seen from the weekly chart of ATSG, the stock was in a strong uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern, which is a continuation pattern.
The flag pattern is marked in purple color in the weekly chart.
Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case.
#5 Oversold RSI: The RSI in the weekly chart is currently near oversold levels, indicating possible bullishness in the near-term.
#6 MACD above Signal Line: In the weekly chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy half the intended quantity of the stock near the lower end of the symmetrical triangle at the current price of $20.97. The rest can be purchased if the stock closes above the double bottom breakout level of around $24.30.
TP: Our first prices are $28 and $35 in the next 4-6 months.
SL: To limit risk, place a stop loss at $19.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 33% to 61% in the next 4-6 months.
- Entry at $20.97: For a risk of $1.47, our target rewards are $7.03 and $14.03. This is a 1:5 and 1:10 risk-reward trade.
- Entry at $24.30: For a risk of $4.80, our target reward (TP#2) is $10.70. This is a 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 10x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical 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 the sector.
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