The leading education services provider for postsecondary education through its subsidiary institutions, American Public University System, Inc. (APUS), and Hondros College of Nursing (HCON), American Public Education, Inc. (NASDAQ: APEI) seems to be getting ready for a price bump according to the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern during the past few months. This is marked as purple color lines. The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – APEI
#3 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#4 Flag Pattern Breakout: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern, which is a continuation pattern.
The flag pattern is marked in purple color in the daily chart. Once a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case.
Weekly Chart – APEI
#5 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. APEI had taken support at the 38.2% Fibonacci support level of the upmove, as seen from the weekly chart. This seems like a good level to bounce back upwards
#6 Bullish Stoch: The %K line of the stochastic is currently above the %D line in the weekly chart. This indicates that the stock may move higher.
#7 Bullish RSI: The RSI is currently moving up above 50 after reaching oversold levels. This indicates the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of the APEI at the current price of $36.25 and the rest if it crosses above the long-term resistance level (marked as an orange dotted line in the daily chart) of $40.
TP: Our target prices are $45 and $50 in the next 4-6 months.
SL: To limit risk, place a stop loss below $33.30 (for entry near $36.50) and $37.80 (for entry near $40). Note that the stop loss is on a closing basis.
Our target potential upside is 12% to 38% in the next 4-6 months.
- Entry at $36.25: For a risk of $2.95, our first target reward is $8.75 and the second target reward is $13.75. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry at $40: For a risk of $2.20, our first target reward is $5.00 and the second target reward is $10.00. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with 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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