The American global manufacturer of electronic instruments and electromechanical devices with a headquarters in the United States and over 220 manufacturing sites worldwide, AMETEK, Inc. (NYSE: AME) seem to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, AME has been trading within a falling wedge pattern during the past few weeks. This is marked in purple color in the daily chart. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once a stock moves up and breaks out from it, it has the potential to move further up.
Daily Chart – AME
#2 Double Bottom Pattern: From the daily chart of AME, we can see that the stock had formed a Double Bottom pattern. This is marked in the chart in orange color. A double bottom pattern is a strong bullish pattern and a breakout from it foretells a possible upmove in the short term.
[hana-code-insert name=’adsense-article’ /]#3 Strong Stochastics: The stochastics oscillator shows that the %K (blue) line is currently above the %D (orange) line and moving up.
This indicates a possible reversal from the current short-term downtrend.
#4 Above MAs: In the daily chart of AME, the stock is currently trading above both 50-day and 200-day SMA. This implies that the bulls are currently in control.
#5 CCI moving up: The CCI is above 100 and moving up, indicating overall bullishness.
#6 Flag Pattern Breakout: As seen in the weekly chart of AME, 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.
Weekly Chart – AME
#7 MACD above Signal Line: The MACD line (blue line) is currently above the MACD signal line (orange line) in the weekly chart, indicating bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks typically retraces to any of the key Fibonacci levels before surging back again. AME had taken support at the 50% Fibonacci support level as seen in the weekly chart. So, this seems like a good area for the stock to bounce upwards.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of AME if it corrects to the breakout level of the double bottom pattern at around $76.
TP: Our target prices are $82 and $90 in the next 3-6 months.
SL: To limit risk, place stop-loss at $73.20. Note that stop loss is on a closing basis.
Our target potential upside is 8% to 18% in the next 3-6 months. For a risk of $2.80, our target rewards are $6 and $14. This is a 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 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 a 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.
Happy Trading!
Tara
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