[Free Chart of The Week] Firstsource Solutions Can Rally 25%

The stock I want to highlight today is Firstsource Solutions Ltd., which caught my eye because it's declined nearly 50% since June and is now showing signs that it's ready to mean revert.

Click on chart to enlarge view.

The daily chart shows prices undercutting their November lows as momentum diverges. This test of former resistance turned support near 46 was quickly met with buyers who are now pushing prices back above their November lows and downtrend line from their October highs.

We love this failed breakdown and bullish momentum divergence setup because our risk is very well-defined and the reward/risk can be very skewed in our favor as it is now.

The weight of the evidence suggests that as long as price are above 47.50, we can be long with an upside target nearly 25% higher at 60.50, which is the 38.2% retracement of the June-January decline. In our experience these types of setups tend to resolve themselves very quickly, so we should know whether we're right or wrong in the next week or two.

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Thanks for reading and let us know if you have any questions!

Allstarcharts Team