The company that develops, manufactures, and sells polishing slurries and pads used in the manufacture of advanced integrated circuit (IC) devices in the semiconductor industry in chemical mechanical planarization (CMP) process, Cabot Microelectronics Corporation (NASDAQ: CCMP) seem to be gearing up for a price surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern breakout: The stock’s daily chart shows that it has currently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level.
Daily Chart – CCMP
#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: 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 bullish bias.
#4 Bullish ADX: The ADX line has currently moved up from below –DI and +DI lines.
The +DI as well as ADX lines are also currently above –DI line.
This indicates possible 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 Breakout: The weekly chart of CCMP shows that the stock has broken out of a cup and handle pattern. This pattern is marked in the chart in pink color. The cup and handle pattern is a consolidation and breakout pattern and a breakout from it indicates that the stock may move higher in the short term.
Weekly Chart – CCMP
#7 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week SMA, indicating that the bulls are still in control.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CCMP is if the stock corrects to the breakout level of the ascending triangle pattern at around $128.
TP: Our target prices are $140 and $150 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss at $120.80. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 9% to 17% in the next 4-6 months.
For a risk of $7.20, the target rewards are $12.00 and $22.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x 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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