The multinational behavioral healthcare provider company headquartered in Tennessee, Acadia Healthcare Company Inc. (NASDAQ: ACHC) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: ACHC’s daily chart shows that the stock was forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts as a good support level. Currently, the stock has broken out of the ascending triangle pattern, which is usually a bullish sign.
Daily Chart – ACHC
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
#3 Bullish ADX and DI: The ADX line is starting to move up from below –DI and +DI lines. The +DI line and the ADX line is also currently above –DI line. All these indicate possible bullishness.
#4 Bullish Stoch: The stochastics reveal that the %K line is currently above the %D line in the daily chart. This is a possible bullish sign.
#5 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a short-term downtrend. The downtrend line is marked in pink color. The stock has also closed above a strong resistance area, which is marked as a green color dotted line. All these are possible bullish signs.
Weekly Chart – ACHC
#6 Bullish MACD: The MACD line (blue color) is currently above the MACD signal line (orange color) in the weekly chart. This indicates a possible bullish bias.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
#8 Above MAs: The stock is trading above its 50-week as well as 200-week SMA as well, indicating that the bulls are still strong.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of ACHC above Friday’s high of $35.80
TP: Our target prices are $40 and $45 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $33.10. Note that this stop loss is on a closing basis.
Our target potential upside is 12% to 26% in the next 4-6 months.
For a risk of $2.70, the target rewards are $4.20 and $9.20. 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 with high volume from the ascending triangle pattern. 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
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