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

JC Parets
January 14, 2019

This weekend I was updating our chartbooks for members and preparing for Wednesday's Members-Only Conference Call when I stumbled upon a chart that's too good not to share.

It's a great trade idea, but it also is a great reminder that while the major stock market indexes may not be trending, there's still plenty of opportunity on both the long and short side of this "market of stocks".

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.

If you're interested in seeing more trade ideas like this one, as well as a full top-down view on Indian Equities, Commodities & Currencies, and Fixed-Income, consider starting a 30-day risk-free trial or signing up for our "Free Chart of the Week" to receive more free research like this.

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

Allstarcharts Team

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