The company that develops, manufactures, and sells high-speed coherent optical interconnect products, Acacia Communications, Inc. (NASDAQ: ACIA) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern: ACIA’s daily chart shows that the stock is currently forming 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 as a good support level. Currently, the stock looks ready for a breakout.
Daily Chart – ACIA
#2 Trading Above MA: The stock is currently trading above its long-term moving average of 200-day SMA, which implies that the bulls are still in control.
#3 MACD above signal line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#4 Bullish RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#5 Trendline Support: The weekly chart shows that the stock has been in an uptrend as it has been forming higher highs and higher lows for the past several weeks.
This uptrend line is marked in purple color in the weekly chart.
The stock has currently taken support on this uptrend line and started moving higher again. This is a possible bullish sign.
Weekly Chart – ACIA
#6 Bullish Stoch: The weekly chart shows that the %K line (blue color) of the stochastic indicator is currently above the %D line (orange color). This is a bullish indication.
#7 Price Above Mas: The weekly chart shows that the stock is currently trading above both the 50-week as well as 200-week SMA. This indicates that the bulls are currently in control of ACIA.
#8 Bullish RSI: The RSI is currently above 50 in the weekly chart as well. This indicates the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ACIA is above the breakout level of the ascending triangle pattern, which translates to a price of around $69.
TP: Our target prices are $75 and $80 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $65.00. Note that this stop loss is on a closing basis.
Our target potential upside is 9% to 16% in the next 4-6 months.
For a risk of $4.00, the target rewards are $6.00 and $11.00. 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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