Trade of the Day: ADI Stock Ready for Its Next Double-Digit Run

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Analog Devices, Inc. (NASDAQ:ADI) — A consolidation in ADI stock is providing traders with a good entry point. The consolidation began after shares spiked to a new 52-week high just below $67 late last month. The cause of the breakout was news that Analog Devices, which manufactures high-performance integrated circuits for analog and digital processing applications, would acquire Linear Technology Corporation (NASDAQ:LLTC).

Analysts’ response to the deal was mixed, but ADI stock received upgrades from Barclays, Morgan Stanley and Goldman Sachs. Additionally, analysts at S&P Capital IQ Equity Research said they are increasingly optimistic about the acquisition, saying it should “help significantly expand ADI’s addressable market and margin profile.” Capital IQ has a 12-month price target of $71 on ADI stock.

Turning to the chart, we can see that ADI stock broke a major bear market resistance line in March, but it failed to hold above it, dropping back below it by the end of April. However, shares triggered a buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), in May.

Following the buy signal, ADI stock resumed the prior advance, piercing its 50-day and 200-day moving averages and establishing a consolidation channel. Then, in early July, shares broke through the resistance line of the channel. In late July, they executed a breakaway gap above $60 on the Linear Technology acquisition announcement, clearly establishing a new bull trend.

ADI stock is currently consolidating the breakout with support at about $62. Further support exists at the 50-day moving average at $60.70.

Buy ADI stock at $62.50 for a trade to $70, which would result in a 12% profit. If high volume accompanies the break, longer-term traders should hold for even bigger gains.

Analog Devices also pays a quarterly dividend of 42 cents per share for a current forward annual yield of 2.7%, and shares are expected to go ex-dividend in early December.

ADI Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/analog-devices-inc-adi-stock-trade-day-3/.

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