The California-based non-diversified, closed-end investment company, ASA Gold and Precious Metals Ltd (NYSE: ASA) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: ASA’s daily chart shows that the stock had recently formed an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the daily chart in purple color. A breakout from a bullish pattern like this usually indicates the possibility of an upmove in the near-term. Currently, the stock has broken out of the ascending triangle pattern, indicating bullishness.
Daily Chart – ASA
#2 Trading Above MAs: The stock is currently trading above both its short-term moving average of 50-day and the long-term moving average of 200-day SMA, which implies that the bulls are currently in control. This is a possible bullish sign.
[hana-code-insert name=’adsense-article’ /]#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color).
This is typically considered as a bullish signal.
#4 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines. The +DI line is also currently above –DI line.
This indicates possible bullishness.
#5 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a short-term downtrend.
It has now started a new uptrend, as it is forming higher highs and higher lows.
The downtrend line is marked in purple color in the weekly chart below. This is a possible bullish sign.
Weekly Chart – ASA
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 MACD Above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is also 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 the shares of ASA is if the stock corrects to the support level of around $10.60. However, you can purchase half the intended quantity of shares of ASA at the current price of $11.55.
TP: Our target prices are $15 and $20 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $9.60. Note that this stop loss is on a closing basis.
Our target potential upside is 30% to 88% in the next 3-5 months.
- Entry at $10.60: For a risk of $1.00, the target rewards are $4.44 and $9.44. This is a nearly 1:4 and 1:9 risk-reward trade.
- Entry at $11.55: For a risk of $1.95, the target rewards are $3.45 and $8.45. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 9x 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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