San Francisco-based multinational logistics real estate investment trust company Prologis Inc. (NYSE: PLD) seems to be getting ready for a surge after a pullback according to its latest charts.
There are quite a few bullish indicators in the daily chart of PLD.
#1 Bullish Harami Pattern: As you can see from the daily chart of PLD below, there is a Bullish Harami candlestick pattern formed on the chart.
This is marked by the green ellipse. In the bullish harami pattern, a bearish candlestick (red) of previous day engulfs the body of the latest small bullish candlestick (green).
This pattern is considered as a sign of a reversal of the downward trend.
#2 200-day SMA Support: As you can see from the daily chart, the stock is currently trading near its 200-day SMA. This usually acts as a good support for the stock.
#3 Ascending triangle pattern Breakout: PLD’s daily chart shows that the stock had broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked in the chart in blue color.
#4 RSI nearing Oversold: In the daily chart, the RSI is near 33, indicating that it is nearing oversold levels. This implies that a possible reversal is around the corner.
#5 Ascending triangle pattern Breakout: PLD’s weekly chart also shows that the stock had broken out of an Ascending Triangle pattern.
Reasons for Some More Correction
The stock may correct until $54.54 (which is the ascending triangle breakout level) due to the following reasons.
- MACD-Price Negative Divergence: In the weekly chart of PLD, there is a negative divergence between price and MACD. While the stock’s price is making higher highs, the MACD histogram is making lower highs. This is marked on the chart as blue dotted lines.
- MACD Line Below Signal Line
- RSI not yet oversold: In the weekly chart, RSI is near 44. So, there is still the possibility that RSI would move downwards again.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level is when PLD pulls back and reaches $54.54. This is marked in the charts as a green line.
TP: Our target price is based on the Ascending Triangle pattern breakout. This translates to around $80.
SL: To limit risk, place a stop loss at $48.50. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 47% in the next 6 months. For a risk of $6.04, the target reward is $25.46. This is a 1:4 risk-reward trade. In other words, this trade offers nearly 4X more potential upside than downside.
Recommended Trade for Speedier Entry
Buy Levels: If you are looking for a speedier entry, you can buy half the intended quantity of the stock PLD at the current price of $61.65.
SL: The stop loss, in this case, would be $60.60 on a closing basis.
TP: The target price remains $80.
The target potential upside for this trade is nearly 30% in the next 6 months. For a risk of $1.05, the target reward is $18.35. This is a nearly 1:17 risk-reward trade, which means that this trade offers nearly 17X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.