Nouveau Monde Graphite Inc. (NYSE: NMG) seems to be poised for a price surge as per its latest charts. The company engages in the acquisition, exploration, development, and evaluation of mineral properties in Canada. It primarily explores graphite.
#1 Channel Breakout: As you can see from the weekly chart, the stock was trading within a downtrend channel during the past few months. This is marked in the chart in purple color. Currently, the stock has broken out of the downtrend channel with a historic high volume. A breakout from the channel usually indicates that the stock would move higher.
#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 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.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating 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 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a pink dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 200-week SMA, indicating that the bulls are in control.
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently above 50 and moving higher. This is a possible bullish sign.
#9 Bullish ADX and DI: The weekly chart shows that the +DI line is above the -DI line. The ADX line is also currently higher than the -DI and +DI lines. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of NMG above the price of around $6.30.
TP: Our target prices are $8.00 and $9.00 in the next 3-6 months.
SL: To limit risk, place stop-loss at $5.40. Note that the stop-loss is on a closing basis.
Our target potential upside is 27% to 43% in the next 3 to 6 months.
For a risk of $0.90, our target rewards are $1.70 and $2.70. 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 trend channel 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.
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