The provider of healthcare workforce solutions and staffing services, AMN Healthcare Services, Inc. (NYSE: AMN) seems to be ready for an upmove in the near term as per its latest charts.
#1 Falling Wedge Pattern: The daily chart shows that the stock has been forming a falling wedge pattern during the past few months. This is marked in purple color in the daily chart. Currently, the stock is moving up after taking support at the bottom rail of the falling wedge pattern. If the stock breaks out of the top of the falling wedge pattern, it may move higher in the near-term.
#2 Oversold RSI: The daily chart shows that the RSI is currently moving upwards from oversold levels. This is a possible bullish sign[hana-code-insert name=’adsense-article’ /] #3 %K above %D: The %K line of the stochastic has currently crossed above the %D line, indicating bullishness.
#4 RSI-Price Bullish Divergence: There is a bullish divergence between RSI and price.
While the price formed a lower low, the RSI formed to a higher low.
This is marked as pink dotted lines in the daily chart. This is a bullish sign.
#5 Bullish CCI: The CCI is currently moving up from oversold levels. This indicates that the price may move higher in the near term.
#6 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. AMN seems to have currently taken support at the 61.8% Fibonacci support level of the upmove, as seen in the weekly chart. This looks like a good level for the stock to bounce back. The stock is also above its 200-week SMA, indicating possible bullishness.
#7 Oversold RSI: The RSI in the weekly chart is currently moving up from oversold levels, indicating possible bullishness in the near-term.
#8 Flag Pattern: As seen from the weekly chart, 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 blue 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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level is if the price of AMN breaks out of the falling wedge pattern at around $56. However, for those with higher risk appetite, you can purchase half the intended quantity of shares at the current price of $51.95.
TP: Our target prices are $65 and $80 in the next 4-6 months.
SL: To limit risk, place a stop loss at $46.80. Note that this stop loss is on a closing basis.
Our target potential upside is 25% to 54% in the next 4-6 months.
- Entry at $51.95: For a risk of $5.15, our target rewards are $13.05 and $28.05. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry at $56: For a risk of $9.20, our target reward (TP#2) is $24. This is a nearly 1:3 risk-reward trade.
In other words, this trade offers nearly 3x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling edge pattern with high volume. 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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