Analog Devices Headed for a Big Move, Here's Why
An up-channel chart pattern has formed in the chart of Analog Devices Inc. (ADI). The stock is expected to either break through the channel resistance...
An up-channel chart pattern has formed in the chart of Analog Devices Inc. (ADI). The stock is expected to either break through the channel resistance, or break below the channel support. Read more to learn how to profit from this trade.
Analog Devices Inc. (ADI) is a leading analog, mixed signal, and digital signal processing chipmaker. The firm has a significant market share lead in converter chips, which are used to translate analog signals to digital and vice versa. ADI's chips are also incorporated into wireless infrastructure equipment.
The company is benefiting from strength in the consumer, industrial, and automotive end-markets. It is seeing increased demand for high-performance analog and mixed signal solutions. Plus, there is growing momentum in the electric vehicle space due to its robust Battery Management System solutions.
ADI has a current ratio of 1.1, indicating it has more than enough liquidity to handle short-term obligations. This has led to a Quality Grade of B in our POWR Ratings system. The company has seen steady earnings growth over the past five years, averaging 16.6% per year. Analysts expect earnings to rise 30.8% this year.
The stock appears a little overvalued with a forward P/E of 23.70. ADI has been in an uptrend since mid-May as shown in the chart below.
Take a look at the 1-year chart of ADI below with my added notations:
Chart of ADI provided by TradingView
ADI appears to have formed an up-channel chart pattern over the past few months. A channel is formed through the combination of a trend line support that runs parallel to a trend line resistance. When it comes to channels, any (3) points can start the pattern, but a 4th test or more helps to confirm it.
A long trade could be entered on a breakout above the channel resistance. A short trade could be entered if ADI were to break below the channel support.
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ADI shares were trading at $170.54 per share on Thursday morning, up $1.70 (+1.01%). Year-to-date, ADI has gained 16.92%, versus a 17.61% rise in the benchmark S&P 500 index during the same period.
Analog Devices Inc. (ADI) is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
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.