The integrated self-managed real estate investment trust (REIT) whose business comprises primarily of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of office real estate assets, Piedmont Office Realty Trust, Inc. (NYSE: PDM) shows signs of an upcoming price surge after a slight correction according to its latest charts.
#1 Uptrend Channel: The daily chart of PDM shows that the stock has been trading within an uptrend channel for the past few months. This channel is marked in the daily chart in blue color. Currently, the stock is trading near the top of this channel. This shows that the stock has gained momentum and has the potential to move up.
#2 IH&S Breakout in Daily chart: As you can see from the daily chart of PDM, the stock had recently broken out of an Inverted Head and Shoulders (IH&S) pattern.
An IH&S pattern is a strong bullish pattern and indicates that the stock may move higher in the short term.
#3 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating the overall bullishness of the stock.
#4 %K above %D: In the daily chart, the %K line (light blue color) is above the %D line (orange color) in the stochastics.
This is a possible bullish sign.
#5 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#6 Aroon’s Bullish Bias: In the weekly chart shown below, the Aroon Oscillator indicates a possible bullish bias. Since Aroon Up (Orange Line) is currently trading above 50 (near 100) and Aroon Down (light blue line) is trading below 50 (near 0), it indicates a possible bullish move in the near future.
#7 Downtrend Broken: The stock has recently broken out of the current downtrend. This downtrend line is marked as a purple line in the weekly chart. This is a bullish sign.
However, a short-term correction seems to be imminent before the next upmove due to overbought RSI in the daily chart and overbought stochastic in the weekly chart. The CCI is also moving down, indicating an upcoming slight correction.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase shares of PDM if it pulls back to the breakout level of the IH&S pattern. This translates to a price of around $19.
TP: Our target prices are $25 and $30.
SL: To limit risk, place a stop loss at the low of the shoulder of the IH&S pattern. This translates to $17.40. Note that this stop loss is on a closing basis.
Our target potential upside is almost 32% to 58% in the next 3-6 months.
For a risk of $1.60, our target rewards are $6.00 and $11.00. This is almost 1:4 and 1:7 risk-reward trade.
In other words, this trade offers nearly 4x to 7x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the Inverted Head and Shoulders pattern 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 the sector.