Autohome Inc. (NYSE: ATHM) seems to be poised for a price surge as per its latest charts. The company operates as an online destination for automobile consumers in the People’s Republic of China. The company delivers interactive content and tools to automobile consumers through its three websites, autohome.com.cn, che168.com, and ttpai.cn on PCs, mobile devices, mobile applications, and mini apps.
Bullish Indications
#1 IH&S Pattern Breakout: As you can see from the daily chart, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in pink color. An IH&S pattern is a strong bullish pattern and a breakout from it indicates that the stock may move higher in the short term. Currently, the stock has broken out of the IH&S pattern, indicating bullishness.
ATHM – 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 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 Breakout from Consolidation area: The weekly daily chart shows that the stock was consolidating within a price range for the past few weeks. This area is marked as a pink color rectangle. The stock has now broken out from this consolidation area and is currently trading above it. The breakout level of this consolidation area typically acts as a good support level. The stock is also trading above its 50-week SMA, indicating that the bulls have gained control.
ATHM – Weekly Chart
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart, 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 ATHM above the price of around $39.50.
TP: Our target prices are $47 and $54 in the next 2-6 months.
SL: To limit risk, place stop-loss at $35. Note that the stop-loss is on a closing basis.
Our target potential upside is 19% to 37% in the next 2 to 6 months.
For a risk of $4.50, our target rewards are $7.50 and $14.50. 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 IH&S 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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