The oldest investor-owned, public utility company operating in Pennsylvania, United States, and the holder of the longest record of consecutive dividends since 1816, York Water Co (NASDAQ: YORW) seems to be ready for an upmove after a brief pullback according to its latest charts.
Bullish Indications
#1 Flag Pattern Breakout: As you can see from the daily 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 below 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). However, a retest to the flag pattern’s breakout level usually happens before resuming the trend. Currently, the stock has broken out of the flag pattern, which is a possible bullish sign.
Daily Chart – YORW
#2 Price Above MAs: The stock’s daily chart shows that the price is currently above the 50-Day SMA as well as 200-day SMA. This shows the strength of the bulls.
#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#4 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 potential buy signal.
#5 Bullish ADX and DI: The ADX line is currently above the +DI and-DI lines, and the +DI line is also above the -DI line. This is a possible bullish indication.
#6 Double Bottom Pattern Breakout: As you can see from the weekly chart below, the stock had recently broken out of a double bottom pattern. This is marked in pink color. A double bottom pattern is a bullish reversal pattern, and a breakout from it indicates that the stock could move upwards.
Weekly Chart – YORW
#7 MACD above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color), implying possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for YORW is above Friday’s high, at around $51.50.
Note: Alternatively, you can purchase the shares of YORW if it corrects to the breakout level of the flag pattern at around $49.00, and set a stop-loss below $45.80.
TP: Our target prices are $55 and $60 in the next 3-6 months.
SL: To limit risk, place a stop loss at $49.30. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 7% to 17% in the next 6 months.
For a risk of $2.20, our target rewards are $3.50 and $8.50. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks with high volume from the flag pattern and double bottom breakout levels. 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