The publicly-traded real estate investment trust that invests in dormitory housing, as well as the largest private dormitory manager in the United States, American Campus Communities, Inc. (NYSE: ACC), seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle pattern breakout: ACC’s daily chart shows that the stock had recently formed an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color lines. Currently, the stock has broken out of the ascending triangle pattern. A breakout from a bullish pattern like ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level.
Daily Chart – ACC
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: The daily chart shows that the MACD (light blue color) is currently above the MACD signal line (orange color).
This typically indicates a bullish setup.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates possible bullishness.
#6 Cup and Handle Pattern: The weekly chart shows that a cup and handle pattern was formed recently.
This is marked in the chart in pink color. The cup and handle pattern is a consolidation and breakout pattern. Once the stock breaks out of the cup and handle pattern, the stock usually starts its upmove. Currently, the stock has broken out of the cup and handle pattern, indicating bullishness.
Weekly Chart – ACC
#7 Other bullish indications: In the weekly chart as well, the MACD and Stochastic indicate bullishness. The Aroon oscillator also indicates the possibility of an upmove. All these are bullish signs.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of ACC if the stock corrects back to the breakout level of the ascending triangle pattern at around $44. But for those with higher risk appetite, you can purchase the shares of ACC at the current price of $45.79.
TP: Our target prices are $50 and $60 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $41.70 (for entry near $44) and $43.20 (for entry near $45.79). Note that the stop loss is on a closing basis.
Our target potential upside is 9% to 36% in the next 4-6 months.
- Entry at $44: For a risk of $2.30, the target rewards are $6.00 and $16.00. This is a nearly 1:3 and 1:7 risk-reward trade.
- Entry at $45.79: For a risk of $2.59, the target rewards are $4.21 and $14.21. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 7x 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.
Happy Trading!
Tara
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