Agilon Health (NYSE:AGL) ticks all the boxes for a powerful breakout in the coming days. AGL is one of the best swing trade setups we’ve recently come across in our daily stock scanning.
The combination of massive sales growth, top relative strength, recent IPO status, and a bullish consolidation pattern means it may be setting up for an explosive breakout with big gains.
Agilon health, which offers healthcare services for seniors through primary care physicians, is a fairly recent IPO (June 2021) with strong quarterly sales growth. Recent IPOs can be explosive movers due to a lack of overhead supply from their limited trading histories.
Strong quarterly sales growth is important because it attracts mutual funds, hedge funds, and other institutional investors that can drive the price higher.
But for the swing trading time frame, a bullish chart pattern with a properly timed entry point is of utmost importance.
Bullish consolidation ahead of the breakout
Currently, AGL is consolidating in a tight range, near its prior swing high.
The price nearly doubled during a two-month rally off the lows, while it held support of its 20-day exponential moving average.
The 50-day moving average recently crossed above the 200-day moving average, a bullish signal that intermediate-term momentum is shifting.
Twice over the past few weeks, AGL also formed bullish reversals after undercutting its 20-day EMA.
This is annotated on the daily chart.
The power of multiple time frame analysis
If the daily chart looks bullish, then we zoom out to the longer-term weekly chart to look for confirmation.
The more time frames that confirm a bullish pattern, the greater the odds of a successful trade.
In the best stock trade setups, the daily, weekly, and monthly charts confirm the patterns of one another.
Further, the longer the time frame, the more weight the pattern will ultimately have on the price.
For example, a weekly trend holds more bearing than a daily trend, while a monthly pattern holds more sway than a weekly pattern.
So, let’s check out the weekly chart.
Notice that AGL has already been building a base for the past four weeks.
The best stock breakouts are typically preceded by at least a five-week base.
AGL also cleared its weekly downtrend line and reclaimed its 10- and 40-week moving averages, after nearly doubling off the low.
The 10-week MA has crossed above the 40-week MA and is trending higher, with the 40-week MA flattening out.
Note the 10-week MA has also set a higher high.
All of these signals indicate bullish confirmation of the daily chart pattern.
Don’t jump the gun
The recent IPO status, strong sales growth, and bullish chart patterns tell us that AGL may soon enjoy an explosive breakout.
However, it’s always crucial to wait for a proper entry trigger with a positive risk-reward ratio.
In this case, buying a breakout above the base high is the logical entry point.
In the meantime, the price action may provide us with additional, lower-risk buy points to build a position on weakness.