The holding company, which engages in the provision of environmental and emission control equipment to power generation industry, Advanced Emissions Solutions, Inc. (Nasdaq: ADES) seems to be ready for a surge as per its latest charts.

Bullish Indications

#1 Ascending triangle pattern breakout: The daily chart of ADES shows that the stock has currently broken out of 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 a good support level.

Daily Chart – ADES

#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 gaining control.

#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 as a bullish bias.

#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 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI).

#6 Breakout from consolidation area: As you can see from the weekly chart, the stock has broken out of consolidation areas, which are marked as blue and orange rectangles. This breakout after periods of consolidation indicates that the stock may move higher in the short term.

Weekly Chart – ADES

#7 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart, indicating bullishness.

#8 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for ADES is if the stock corrects to the breakout level of the ascending triangle pattern at around $13. But for those with a higher risk appetite, you can purchase half the intended quantity of shares of ADES at the current price of $14.22.

TP: Our target prices are $17 and $22 based on the breakout from the Ascending Triangle pattern.

SL: To limit risk, place a stop loss at $10.40. Note that this stop loss is on a closing basis.

Our target potential upside is nearly 31% to 69% in the next 4-6 months.

  • Entry at $13: For a risk of $2.60, the target rewards are $4.00 and $9.00. This is a nearly 1:2 and 1:4 risk-reward trade.
  • Entry at $14.22: For a risk of $3.82, the target reward (TP#2) is $7.78.This is a nearly 1:2 risk-reward trade.

In other words, this trade offers nearly 2x to 4x 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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