Aehr Test Systems (NASDAQ: AEHR) seems to be poised for a price surge as per its latest charts. The company provides test systems for burning-in and testing logic, optical, and memory integrated circuits worldwide. It offers products, such as the ABTS and FOX-P families of test and burn-in systems and FOX WaferPak Aligner, FOX-XP WaferPak Contactor, FOX DiePak Carrier, and FOX DiePak Loader.
Bullish Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern for the past few weeks. These are marked as purple color lines. The stock has currently broken out of the falling wedge pattern and looks poised for an upmove. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
AEHR – Daily Chart
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA, indicating that the bulls are gaining 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 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. This indicates bullishness.
AEHR – Weekly Chart
#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.
#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 AEHR above the price of around $12.00.
TP: Our target prices are $14.50 and $17.00 in the next 3-6 months.
SL: To limit risk, place stop-loss at $10.50. Note that the stop-loss is on a closing basis.
Our target potential upside is 21% to 42% in the next 3 to 6 months.
For a risk of $1.50, our target rewards are $2.50 and $5.00. 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 falling wedge 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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