The Massachusetts-based leading energy efficiency and renewable energy company, Ameresco Inc. (NYSE: AMRC) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
Daily Chart – AMRC
#2 MACD Above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.
[hana-code-insert name=’adsense-article’ /]#3 Above MAs: In the daily chart, the stock is currently trading above its 50-day as well as 200-day SMA.
This implies that the bulls are slowly gaining control.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI).
These point to a possible upmove in the near-term.
#5 Flag Pattern Breakout: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern and is marked in the chart in purple color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern, which is a possible bullish sign.
#6 Bullish RSI: The RSI is above 50 and moving up in the weekly chart. This is a possible bullish sign.
#7 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for AMRC is in two scenarios
- If the stock closes above the resistance level of $16.70. (marked as a green dotted line)
- If the stock corrects to the support level of $15. (marked as a pink dotted line)
However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of AMRC at the current price of $15.94.
TP: Our target prices are $20 and $25 in the next 3-6 months.
SL: To limit risk, place stop-loss at $13.30. Note that the stop loss is on a closing basis.
Our target potential upside is 25% to 66% in the next 3-6 months.
- Entry at $15: For a risk of $1.70, our target rewards are $5.00 and $10.00. This is a 1:3 and 1:6 risk-reward trade.
- Entry at $15.94: For a risk of $2.65, our target rewards are $4.05 and $9.05. This is a 1:2 and 1:3 risk-reward trade.
- Entry at $16.70: For a risk of $3.40, our target reward (TP#2) is $8.30. This is a 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 6x 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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