A2 Milk Company (A2M) has recovered strongly from the Feb to Mar period of market volatility to be currently consolidating just below all time highs.
The $20 level is a large round number and is currently providing stiff resistance, having capped the price for the past six weeks. However, with the trend up and longer-term momentum strong (A2M is currently ranked 7th out of 100 based on our measure of momentum from the ASX100), an eventually break higher is a strong possibility. Volatility is also contracting, which is evident by the tightening of the bollinger bands, which often precedes a breakout.
There are several ways traders could tackle this. Traders may take an initial position at market now, and look to add to the position on a break of the $20 level. The more conservative approach is to wait for a break of $20 before entering. Initial stop loss levels should be below the recent lows of $18.65.
The catalyst for a strong move in the price is likely to be the release of their FY20 earnings, due on Wednesday the 19th. Trading ahead of earnings comes with increased risk so caution is warranted. It would be prudent to trade a smaller size than normal.
