Virtusa Corp ($VRTU)

Market Cap: 1.33 B (Mid-Cap)
Average True Range: 2.13
Beta: 2.01
Forward P/E: 19.85
Sector: Information Technology Services
Sales Growth Q/Q: 21.8%
EPS Growth This Year: 14.40%
EPS Growth Next Year: 27.04%

VRTU has been trading steadily higher since 2009 and has gained roughly 1000% off those lows. We have seen it trade in a tight consolidation range since 2014 and has recently broken out from that base on high volume.

The stock is trading above both the 20 and 50 WMA's which are stacked and rising. This is true on the Daily timeframe as well with the 20 and 50 DMA's.

We have a strong trending stock on multiple timeframes, an 18-month sideways range, followed by a volume expansion that rocketed the stock to all-time highs.

I like an entry here as price has digested the recent strong breakout on a very low volume consolidation. Stops should be placed below the weekly breakout bar at $40.28 on a daily closing basis. Using a standard 1% portfolio risk we can purchase 30 shares at the current price. This will allow for a position size to be roughly 10% of our total portfolio while risking no more than $140 (1% of account equity).

WEEKLY Chart

The longer-term weekly view shows the prior uptrend and 18-month consolidation range. I also like to see that throughout this "digestion" period the MACD indicator never dipped below Zero. This suggests the uptrend is still intact and the consolidation was just a rest within a longer trend higher.

Here is a zoomed in view of the consolidation behavior; this is textbook explosive action. The stock continues to trade against the highs and forms tighter and tighter trading ranges as volumes are relatively light. Once the range becomes too tight the stock busts through to new highs on very strong volume. This is how potential monster rallies begin.

DAILY chart

The Daily chart shows the recent breakout due to a strong Q4 earnings result with increasing sales and earnings. We have seen volumes decrease significantly since the breakout has "cooled" showing a lack of any real selling interest.

With stops placed below the low prior to the recent breakout we have a great risk/reward setup. We also have a potential level to trail stops to quickly at ~$42 should the breakout continue to hold above.