Is American Green Poised To Spike?

After a dramatic and relatively drawn-out decline over the last few months since the February 11th top, a number of signals are indicating the downtrend in American Green may be coming to an end.

Figure 1

Firstly, notice the falling wedge pattern in figure 1. The wedge formation is circumscribed between the two blue dashed trendlines. This is an intrinsically bullish pattern, meaning the share price is expected to rally after a breakout of the wedge. Thursday's price action managed to break above the upper trendline for the first time, and hold above it for the close. That is a promising sign for bulls. Price targets from this pattern can be derived by measuring the vertical height of the base of the wedge and projecting it upwards from the point of breakout. This yields a minimum 1:1 target of around $0.013257. Doubling the expected price excursion for a 2:1 target gives a higher target around $0.018504.

Also observe the trend in volume action during the period of decline. Volume has contracted gradually down to historically low levels. This represents a bullish volume divergence, where falling market participation indicates a lack of conviction in the move and thus that a reversal and strong trending phase in the opposite direction is likely.

Finally, the stochastic oscillator is included in figure 1, which is set with the default parameters. Notice that the stochastic is displaying a bullish divergence with price while also testing oversold conditions. The divergence is present between price which has made three consecutively lower lows, and the oscillator which has made three consecutively higher lows. For reference, divergence can be present between only two consecutive peaks or troughs, but three represents an even stronger signal. This is also a sign that downside momentum is waning, and thus that a stronger move to the upside is likely to unfold.

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