An ascending triangle pattern has formed in the chart of Analog Devices, Inc. (ADI). This is a bullish pattern and if the resistance level is broken, a breakout could occur.
ADI is a leading analog, mixed signal, and digital signal processing chipmaker. The company has a significant market share lead in converter chips, which are used to translate analog signals to digital and vice versa.
The company is benefiting from strength in the electric vehicle space driven by its Battery Management System (BMS) solutions. Plus, the rising adoption of advanced radio systems in 5G is driving growth in the firm’s communication segment. Management is optimistic about growth opportunities in 5G.
ADI has a current ratio of 1.6, which means it has more than enough liquidity to handle short-term obligations. The company is also quite profitable with a net profit margin of 24%. In its most recent reported quarter, earnings were up 39.8% year over year, while revenue rose 20%.
Its stock is a bit overvalued with a trailing P/E of 41.99 and a forward P/E of 25.51. The stock has been trending up since September, but has shown mixed momentum for the year.
Take a look at the 1-year chart of ADI below with the added notations:
Chart of ADI provided by TradingView
While climbing a clear trendline of support (green), ADI has also formed an important level of resistance at $164 (red), creating an ascending triangle pattern. The stock just hit the resistance a few weeks ago but could now be making another run at that level.
A long trade could be entered on a break above $164 with a protective stop placed under the point of entry.
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ADI shares were trading at $156.27 per share on Friday morning, up $0.90 (+0.58%). Year-to-date, ADI has gained 6.23%, versus a 10.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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