The Memphis, Tennessee-based company that provides residential and commercial services, Servicemaster Global Holdings Inc. (NYSE: SERV) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock was recently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple 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 has broken out of the ascending triangle pattern, which is usually a bullish sign.
Daily Chart – SERV
#2 Trading Above MA: The stock is currently trading above its 50-day SMA, which implies that the bulls are currently in control.
#3 Bullish ADX and DI: The ADX line is starting to move up from below –DI and +DI lines.
The +DI and the ADX lines are currently above –DI line.
All these indicate possible bullishness.
#4 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.
#5 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#6 Bounceback from support area: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. The weekly chart shows that the stock had recently taken support at the 23.6% Fibonacci level before moving higher and closing above the 50% Fibonacci level. This seems like a strong support area for the stock.
Weekly Chart – SERV
#7 Bullish RSI: The RSI had started moving higher after reaching oversold levels in the weekly chart and has currently crossed above 50. This is a possible bullish sign.
#8 Bullish MACD: The weekly chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color), which is a positive indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of SERV if it trades above the 200-day SMA. This translates to a price of around $38.40.
TP: Our target prices are $45 and $50 in the near-term.
SL: To limit risk, place a stop loss near $33.90. Note that this stop loss is on a closing basis.
Our target potential upside is 17% to 30% in the next 3-6 months.
For a risk of $4.50, the target rewards are $6.60 and $11.60. 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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