The leading provider of advanced, high-performance process control metrology and inspection systems used primarily in the fabrication of semiconductors and other solid-state devices as well as industrial and scientific applications, Nanometrics Incorporated (NASDAQ: NANO) seem to be poised for a price surge after correction as per its latest charts.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
Daily Chart – NANO
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA. This is a possible bullish sign.
[hana-code-insert name=’adsense-article’ /]#3 Symmetrical Triangle Pattern Breakout: The stock had formed and broken out of a Symmetrical Triangle pattern as seen in the daily chart.
A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs.
This is marked on the daily chart as pink lines.
This is also a possible bullish sign.
#4 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.
#5 %K above %D: The %K line (blue color) is currently above the %D line (orange color) in the stochastic. This is a bullish sign. However, stochastic is now near overbought levels, indicating that the price may move down in the short term before starting the upmove again.
#6 Support Near Breakout from Consolidation Area: As you can see from the weekly chart, the stock was trading within a consolidation area before finally breaking out from it. This area is marked as a green rectangle. The stock then corrected and has started moving up after taking support near the breakout level of the consolidation area. This seems like a positive sign.
Weekly Chart – NANO
#7 MACD above Signal Line: The weekly chart also shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
#8 Strong RSI: The weekly chart shows that RSI is currently above 50 and moving up. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for NANO is if the stock corrects to the breakout level of the symmetrical triangle pattern at around $30.20. But for those with higher risk appetite, you can purchase half the intended quantity of shares of NANO at the current price of $31.61.
TP: Our target prices are $40 and $45 in the next 4-6 months.
SL: To limit risk, place stop-loss at $28. Note that the stop-loss is on a closing basis.
Our target potential upside is 27% to 49% in the next 4 to 6 months.
- Entry at $30.20: For a risk of $2.20, our target rewards are $9.80 and $14.80. This is a 1:5 and 1:7 risk-reward trade.
- Entry at $31.61: For a risk of $3.61, our target rewards are $8.39 and $13.39. This is a 1:2 and 1:4 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 from the downtrend channel breakout level 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
[hana-code-insert name=’MMPress 2′ /]