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Long

Acadia Healthcare Company Inc (ACHC)

Wednesday, August 6, 2014

The Trade:

This afternoon, Acadia Healthcare Company Inc (ACHC) presents a great swing-trading opportunity to capture a quick +6.50% gain with this Health Care Facilities stock.

From December of 2011 through the end of 2013, ACHC was entrenched in a strong long-term up-trend. The stock rarely pulled back, and when it did, the consolidations were brief. In 2013 alone, ACHC more than doubled, gaining +102.69% on the year.

This year, however, has been a bit of a different story. The stock had a tumultuous first half after hitting highs of $54 in mid-January. Following a retest and failure at this price in mid-February, ACHC spent the months of March and April down-trending in pretty consistent fashion.

The stock finally found footing at $40 towards the end of April, and spent early May establishing a solid base at this price. Since then, ACHC has shifted gears and is back on the upswing. The stock's intermediate-term trend is now positive, and there has been plenty of upward thrust over the past two months.

On July 29th, ACHC hit opening highs of $51.01 before pulling back and basing comfortably above the 50-day moving average. The stock now looks to be in prime position for a buy and continue its turnaround higher. There has been a nice up-ward channel emerging since May, and buyers appear to be stepping in at just the right time.

While there is intermediate-term upside to $54, this trade set-up is focused on capturing the short-term gain from current prices to the short-term resistance at $51.01. Given the way that ACHC has been trending since June, the move looks likely, and could happen as early as this week.

From current prices, a run back to $51.01 would net a gain of +6.50%. Setting a stop at the 50-day moving average ($46.47) makes the potential downside -2.98%. Thus, the reward to risk ratio is roughly 2 : 1, which is favorable.

ACHC seems to be righting the ship after a rough first half of the year. Today would be a good time to hop aboard and capture a quick gain to $51.01, or hold on and wait for a retest of weekly highs at $54.

When to Enter the Trade:

Buy at the current price (~$47.90).

When to Exit the Trade:

Sell at a close below $46.47 (Breakdown) / An intraday price of $51.01 or above (Profit-Taking)

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Company Profile:

Acadia Healthcare Company, Inc. is a provider of inpatient behavioral healthcare services in the United States. The Company's principal business is to develop and operate inpatient psychiatric facilities, residential treatment centers, group homes, substance abuse facilities and facilities providing outpatient behavioral health services in the United States. In January 2014, the Company announced that it has completed the acquisition of inpatient psychiatric facilities in Seattle, Washington, and Riverside, California. In July 2014, the Company acquired Partnerships in Care (PiC).

Stock Rating:

The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest.

Disclosure:

At the time of publication the editor and affiliated companies own the following positions: None

Note: Positions may be bought or sold while this publication is in circulation without notice.

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