Evolent Health Inc. (NYSE: EVH) seems to be poised for a price surge as per its latest charts. The company provides clinical and administrative solutions to payers and providers in the United States. It operates in two segments, Evolent Health Services, and Clinical Solutions.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
EVH – Daily Chart
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in control. This is a positive indication.
#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 bullish.
#4 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#6 Ascending Triangle Pattern: The weekly chart shows that the stock is currently poised for a breakout from an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the chart in orange color lines. A breakout from this pattern typically indicates bullishness. The base of the triangle generally acts as a good support level after the breakout. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are firmly in control.
EVH – Weekly Chart
#7 %K above %D: The %K (blue) line of stochastic is currently above the %D (Orange) line in the weekly chart. This is a possible bullish indication.
#8 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of EVH above the price of around $33.80.
TP: Our target prices are $37 and $40 in the next 3-6 months.
SL: To limit risk, place stop-loss at $32.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 10% to 18% in the next 3 to 6 months.
For a risk of $1.80, our target rewards are $3.20 and $6.20. 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 from the breakout level of the symmetrical triangle pattern with a 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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