The company that develops, manufactures, and markets a range of disposable protective apparel, infection control, and building supply products, Alpha Pro Tech, Ltd. (NYSE: APT) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock was forming a falling wedge pattern for the past few weeks. This is marked as pink color lines. The stock is currently near the upper rail of the falling wedge pattern and looks poised for a breakout. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – APT
#2 Price above MA: The stock is currently trading above its 50-day SMA, indicating that the bulls are presently gaining control.
#3 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.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and the ADX line is starting to move up from below (-DI) and (+DI) lines.
#6 Fibonacci Support: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 23.6% Fibonacci support level before moving higher, as seen in the weekly chart. The stock is also trading above its 200-week SMA. This seems like a good area for the stock to surge higher.
Weekly Chart – APT
#7 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart and is also moving higher from oversold levels. 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 price for APT is if the stock breaks out of the falling wedge pattern and closes above the price of $10.40.
TP: Our target prices are $13.00 and $15.00 in the next 4-6 months.
SL: To limit risk, place a stop loss below $8.90. Note that the stop loss is on a closing basis.
Our target potential upside is 25% to 44% in the next 4-6 months.
For a risk of $1.50, our first target reward is $2.60 and the second target reward is $4.60. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x 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 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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