The company that designs and manufactures agricultural equipment and infrastructure maintenance equipment for governmental and industrial use, Alamo Group Inc. (NYSE: ALG) seem to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, ALG was forming a falling wedge pattern during the past few months. This is marked as purple color lines. The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
#2 Bullish MACD: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal. MACD is also near oversold levels, indicating possible bullishness.
#4 Bullish RSI: The RSI is currently above 50 and moving up, indicating bullishness.
#5 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again.
ALG has currently taken support at 50% Fibonacci support level as seen in the weekly chart.
The stock is also trading above its 200-week SMA.
So, this seems like a good area for the stock to bounce upwards.
#6: Bullish CCI: In the weekly chart, CCI is moving up after reaching oversold levels. This is a bullish sign.
#7 Oversold RSI moving up: The RSI is moving up after reaching oversold levels, indicating strength.
#8 Bullish Stochastic: The stochastic had recently moved up after reaching below 20. The %K line is currently above the %D line. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for the shares of ALG if it closes above $100. But for those with a higher risk appetite, you can buy half the intended quantity of stocks at the current price of $91.02.
TP: Our target prices are $115 and $130 in the next 4-6 months.
SL: To limit risk, place a stop loss below $82.50 (for entry near $91.02) and $93.50 (for entry near $100). Note that the stop loss is on a closing basis.
Our target potential upside is 15% to 43% in the next 4-6 months.
- Entry at $91.02: For a risk of $8.52, our first target reward is $23.98 and the second target reward is $38.98. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry at $100: For a risk of $6.50, our first target reward is $15.00 and the second target reward is $30.00. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge 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 the sector.
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