The company that provides personal care services to elderly, chronically ill, disabled persons, and individuals who are at risk of hospitalization or institutionalization in the United States, Addus Homecare Corporation (NASDAQ: ADUS) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern breakout: The daily chart of ADUS shows that the stock 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 as a good support level.
Daily Chart – ADUS
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
#3 Bullish Stoch: The %K line of the stochastic has currently crossed above the %D line near oversold levels in the daily chart, indicating bullishness.
#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 moved higher from below both (+DI) and (-DI).
#5 Bullish MACD: The MACD line (blue color) is currently above the MACD signal line (orange color) which indicates bullishness.
#6 Uptrend Unbroken: The weekly chart shows that the stock’s uptrend is currently unbroken, as it has been forming higher highs and higher lows. The uptrend line is marked in orange color in the chart. The stock has also closed above the previous high, which is marked as a purple color ellipse. All these are possible bullish indications.
Weekly Chart – ADUS
#7 Above MAs: The stock is currently trading above its 50-week as well as 200-week SMA, indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ADUS is above yesterday close, at around $109.20. Alternatively, you can purchase the shares of ADUS if it corrects to the breakout level of the ascending triangle pattern at around $104.
TP: Our target prices are $120 and $130 in the next 3-6 months.
SL: To limit risk, place a stop loss at $103 (for entry near $109.20) and $94.30 (for entry near $104.00). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 10% to 25% in the next 4-6 months.
- Entry near $104: For a risk of $9.70, the target rewards are $16.00 and $26.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $109.20: For a risk of $6.20, the target rewards are $10.80 and $20.80. 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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