There are quite a few bullish indicators in HPP’s daily chart.
Bullish Indications in the Chart
#1 IH&S Pattern Formation: As you can see from the daily chart of HPP below, the stock is currently forming the second shoulder of the Inverted Head and Shoulders pattern.
The strong bullish pattern would get completed once it breaks out of the neckline (marked as the green line in the daily chart).
#2 Reversal Candle: The latest candle on the daily chart of HPP is a reversal candle. The stock opened with a huge gap-down but closed near its highs. This shows that the selling pressure was absorbed and there was buying at lower levels. This is a bullish signal.
#3 Bullish MA crossover: The 50-day SMA had crossed over the 200-day SMA on November 24, 2017. This cross of a shorter term MA above longer-term MA is called as a bullish crossover and indicates bullishness for the stock.
#4 RSI nearing oversold: The daily chart of HPP shows that RSI is currently near the oversold levels.
#5 Flag Pattern: As seen from the weekly chart of HPP, the stock was in a strong uptrend from February 2016 to February 2017. Then the stock started consolidating and was in a range. This is a classic flag pattern and is marked in the weekly chart in blue color. A flag is a continuation pattern.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of HPP between the price range of $31.60 (lower band of the Bollinger band shown on weekly chart) and $32.87 (current price).
TP: Our first target price (TP#1) is the neckline of the IH&S pattern which is $35.75. The second target price (TP#2) is the IH&S breakout target of $40.
SL: To limit risk, place a stop loss below $31.20, which is below the head of the IH&S pattern in the daily chart.
- When entering near current price of $32.87
- For TP#1: Our target potential upside is almost 9% in the next 2-3 months. For a risk of $1.67, our target reward is $2.88. In other words, this trade offers nearly 2x more potential upside than downside.
- For TP#2: Our target potential upside is almost 22% in the next 5-6 months. For a risk of $1.67, our target reward is $7.13. In other words, this trade offers nearly 4x more potential upside than downside.
- When entering near $31.60
- For TP#1: Our target potential upside is almost 13% in the next 2-3 months. For a risk of $0.40, our target reward is $4.15. In other words, this trade offers nearly 10x more potential upside than downside.
- For TP#2: Our target potential upside is almost 27% in the next 5-6 months. For a risk of $0.40, our target reward is $8.40. In other words, this trade offers nearly 21x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it does not complete the inverted head and shoulders pattern and breaks down from the current levels with large volume. 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.