ABM Industries Is Set for a Clean Breakout

 | Sep 06, 2017 | 10:14 AM EDT
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ABM Industries (ABM) looks poised for an upside breakout as the company seems to be cleaning up. New York-based ABM provides janitorial, electrical and lighting, energy, facilities engineering, HVAC and mechanical, landscape and turf services.

In this daily bar chart of ABM, below, we can see a large ascending or rising triangle pattern. If you use a ruler or your imagination you should be able to draw a horizontal line across $45 for the top of the triangle. Supply keeps coming out around $45 to cap the advance. 

Now look at the higher lows from around $38 in October to $39 in January and $40.50 in June. The pattern of higher lows tells us that buyers of ABM have been getting more aggressive over the months with demand coming in for more shares of ABM at higher and higher prices. Eventually demand will overcome the supply and ABM will break out over $45. The height of the triangle at its widest point is $7 back in November. This $7 can be added to $45 for a $52 price target when ABM finally breaks out.

The pattern of volume has been diminishing since December, which is typical for a consolidation pattern like a triangle. As the up-and-down swings of ABM get narrower and narrower the volume dries up as the profit opportunity shrinks. Despite the slower pace of volume, the On-Balance-Volume (OBV) line rises from February, telling us that the buyers of ABM have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator is currently in a bullish configuration above the zero line.

Looking at the weekly bar chart of ABM, below, we can see that prices are above the rising 40-week moving average line. The line looks like it is starting to flatten so an upside breakout should get the line rising again. The weekly OBV line has been moving sideways since February but shows a rise in the past two months. The weekly MACD oscillator is turning up for a fresh go long signal.

In this Point and Figure chart of ABM, below, we can see the triangle pattern with the equal highs along the top and the higher lows along the bottom. A trade at $45.28 should be a fresh breakout and open up a $52.73 price target.

Bottom line: Traders should look to buy a strong close above $45 risking below $42 and looking for gains to $52-$53.

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