Alliance Data Systems Corporation

Alliance Data Systems Corporation (NYSE: ADS) is an IT services company engaged in data-driven marketing, loyalty, and payment solutions for industries.

As per our previous recommendation on ADS as on September 17, 2021, we recommended a ‘Buy’ rating on the stock at USD 95.04 from the technical analysis standpoint for 2-4 weeks. Stock made a high of USD 106.08 on September 27, 2021 and witnessed an upside gain of ~11.62 percent from the recommended entry-level. Considering the recent price action and technical indicators analysis, we are of the view that the stock may witness an upward direction for the next couple of sessions (1-2 weeks), and hence we recommend a ‘Hold’ rating on the stock at the close price of USD 100.09 (as on October 18, 2021). The summary of our previous ‘Buy’ rating, target levels, and price movement since the previous recommendation for ADS is provided as below: 

Price Action Analysis (on the Weekly Chart)

ADS prices are sustaining above a downward sloping trend line breakout level for the past 1 month, indicating the possibility of a further uptrend. Now an immediate resistance level for the stock appears at USD 116.70 and prices may test the level in the short-term (1-2 weeks). A further move above USD 116.70 backed by volumes may extend buying in the stock. 

On the weekly chart, RSI (14-period) is trading around mid-point at ~50.95 levels. The CMP is above the 50-period SMA and supports an up move; however, the 21-period SMA is above CMP with a narrow margin which may act as a resistance level for the stock.

Conclusion:

Based on the above-mentioned price action and technical indicators analysis, we can conclude that Alliance Data Systems Corporation is still looking technically well-placed on the chart, and we recommend a ‘Hold’ rating on the stock at the close price of USD 100.09 (as on October 18, 2021). 

Note 1: Investors can consider exiting from the stock if the Target Price or Stop loss mentioned as per the technical analysis has been achieved and subject to the factors discussed above. 

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. We suggest Investors to Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 60% of the Target 1. Investors should consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of the Target 1. 

The reference date for all price data, volumes, technical indicators, support, and resistance levels is October 18, 2021. The reference data in this report has been partly sourced from REFINITIV.

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.