Acuity Brands, Inc (AYI) is an industrial technology company. They provide lighting and building management solutions in North America and internationally. The company was incorporated in 2001 and is headquartered in Atlanta, Georgia. AYI is a component of the S&P 400 Mid Cap Index
Market Cap: 5.968B
Beta (5Y Monthly): 1.54
PE Ratio (TTM): 16.75
Average Volume: 277,357 (1)
Cup and Handle (Bull Market Stats):
Overall performance rank (1 is best): 3 out of 39
Breakeven failure rate: 5%
Average rise: 54%
Throwback rate: 62%
Percentage meeting price target:
The above numbers are based on 913 perfect trades. (2)
AYI
Daily Volatility (Standard deviation YTD): 2.20%
Annualized Volatility (Standard Deviation YTD): 34.24%
S&P 400 Mid Cap Index
Daily Volatility (Standard deviation YTD): 1.59%
Annualized Volatility (Standard Deviation YTD): 24.76%
(The above were calculated using historical data)
The data above shows the daily and annualized volatility for AYI and the index it is a component of. As you can see AYI has a higher daily and annualized volatility. This can be good or bad. Depending on the way the stock goes and your position. For this pattern, I would say this is a good thing - the pattern requires volatility to breakout and reach the price target.
AYI has formed a cup and handle chart pattern. This pattern, as the name suggests, looks like the top ridge of a cup and the handle. The pattern forms as follows: price rise - left peak forms - price goes down at an angle and forms a trough - price rises again at an angle to form a peak. Sometimes, as in this case, the right peak may form a flag/consolidation pattern as well.
The blue line on the chart above represents a line of support for the stock. The red box represents what could possibly be a previous cup and handle position. However, in this pattern and the one on the right, I'm not that convinced of their authenticity.
The price rise before the pattern formations is not that convincing. I would ideally like to see an upwards trend for at least 3 months. The price has been in a downward trend YTD and then moving horizontally for nearly six months. However, this horizontal movement may be useful - if there is a upward breakout, the momentum could be strong.
Cup and handle patterns are ranked 3/34 patterns - meaning when done right, the pattern can bring good performance. The Breakeven failure rate is 5% which is low and hence a good signal. The Throwback rate is 62% which may be a concern. Especially if the pattern is not that strong - as in this case.
Totaling this all together, I would give this pattern a rating is 3/5. The ROI may not seem sufficient to justify a long position. Henceforth this is a riskier position.
The main issues are:
A previous cup and handle position formed before that did not breakout
Lack of a strong upwards trend before the pattern formation
The pattern duration is around 10 weeks. This is within the range of ideal 7 - 65 weeks, albeit at the lower end of the spectrum.
The price target is the difference between the right peak and trough * the percentage meeting price above:
$204.54
From the current price that represents a 9.13% ROI.
Macroeconomic considerations:
Interest rates are rising and so will inflation. We are most likely already in a recession. I would not be concerned about this for this trading idea. This will most likely be a short-term trade for a couple of weeks once the stock breaks out with a close above the trendline.
Fundamental analysis:
Since this will be a short-term trade, I did not find the need to include any further research- the next earnings is not until January so no concerns.
References:
1 finance.yahoo.com/quote/AYI
2 thepatternsite.com/cup.html
Market Cap: 5.968B
Beta (5Y Monthly): 1.54
PE Ratio (TTM): 16.75
Average Volume: 277,357 (1)
Cup and Handle (Bull Market Stats):
Overall performance rank (1 is best): 3 out of 39
Breakeven failure rate: 5%
Average rise: 54%
Throwback rate: 62%
Percentage meeting price target:
The above numbers are based on 913 perfect trades. (2)
AYI
Daily Volatility (Standard deviation YTD): 2.20%
Annualized Volatility (Standard Deviation YTD): 34.24%
S&P 400 Mid Cap Index
Daily Volatility (Standard deviation YTD): 1.59%
Annualized Volatility (Standard Deviation YTD): 24.76%
(The above were calculated using historical data)
The data above shows the daily and annualized volatility for AYI and the index it is a component of. As you can see AYI has a higher daily and annualized volatility. This can be good or bad. Depending on the way the stock goes and your position. For this pattern, I would say this is a good thing - the pattern requires volatility to breakout and reach the price target.
AYI has formed a cup and handle chart pattern. This pattern, as the name suggests, looks like the top ridge of a cup and the handle. The pattern forms as follows: price rise - left peak forms - price goes down at an angle and forms a trough - price rises again at an angle to form a peak. Sometimes, as in this case, the right peak may form a flag/consolidation pattern as well.
The blue line on the chart above represents a line of support for the stock. The red box represents what could possibly be a previous cup and handle position. However, in this pattern and the one on the right, I'm not that convinced of their authenticity.
The price rise before the pattern formations is not that convincing. I would ideally like to see an upwards trend for at least 3 months. The price has been in a downward trend YTD and then moving horizontally for nearly six months. However, this horizontal movement may be useful - if there is a upward breakout, the momentum could be strong.
Cup and handle patterns are ranked 3/34 patterns - meaning when done right, the pattern can bring good performance. The Breakeven failure rate is 5% which is low and hence a good signal. The Throwback rate is 62% which may be a concern. Especially if the pattern is not that strong - as in this case.
Totaling this all together, I would give this pattern a rating is 3/5. The ROI may not seem sufficient to justify a long position. Henceforth this is a riskier position.
The main issues are:
A previous cup and handle position formed before that did not breakout
Lack of a strong upwards trend before the pattern formation
The pattern duration is around 10 weeks. This is within the range of ideal 7 - 65 weeks, albeit at the lower end of the spectrum.
The price target is the difference between the right peak and trough * the percentage meeting price above:
$204.54
From the current price that represents a 9.13% ROI.
Macroeconomic considerations:
Interest rates are rising and so will inflation. We are most likely already in a recession. I would not be concerned about this for this trading idea. This will most likely be a short-term trade for a couple of weeks once the stock breaks out with a close above the trendline.
Fundamental analysis:
Since this will be a short-term trade, I did not find the need to include any further research- the next earnings is not until January so no concerns.
References:
1 finance.yahoo.com/quote/AYI
2 thepatternsite.com/cup.html