The California-based American multinational engineering firm that is engaged in designing, building, financing and operating infrastructure assets for governments, businesses and organizations, Aecom (NYSE: ACM) seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: ACM’s daily chart shows that the stock has recently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level.
Daily Chart – ACM
#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.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#4 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.
#5 MACD above Signal Line: In the daily chart, the MACD line is above the MACD signal line which is a possible bullish signal.
#6 IH&S Pattern: From the weekly chart, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart in orange color. An IH&S pattern is a bullish pattern. A breakout from an IH&S pattern is usually the sign of an upcoming bullish move. Currently, the stock has broken out of the IH&S pattern, indicating a possible bullish bias.
Weekly Chart – ACM
#7 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal.
#8 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the recommended buy level is when the stock corrects to the breakout level of the ascending triangle pattern at around $34. However, you can purchase half the intended quantity of stocks of ACM at the current price of $35.17.
TP: Our target prices are $40 and $50 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $31.80. Note that this stop loss is on a closing basis.
Our target potential upside is 13% to 47% in the next 4-6 months.
- Entry at $34: For a risk of $2.20, the target rewards are $6.00 and $16.00. This is a nearly 1:3 and 1:7 risk-reward trade.
- Entry at $35.17: For a risk of $3.37, the second target reward is $14.87. This is a nearly 1:4 risk-reward trade.
In other words, this trade offers nearly 3x to 7x 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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