The real estate investment trust that invests in shopping centers, GGP Inc. (NYSE: GGP) shows signs of an upcoming price surge based on its latest charts. The Chicago-based company has many bullish signs on its charts.
Bullish Indications
#1 Broken Downtrend: As you can see from the daily chart of GGP, the stock was in a downtrend for the past year and a half.
[hana-code-insert name=’adsense-article’ /]This downtrend is marked in the chart as a purple line.This downtrend was broken on November 6, 2017 when the stock surged ahead.
Currently, GGP has corrected and is now near the breakout level.
This is usually a good price point for a bounce back.
#2 IH&S Pattern in Daily chart: As you can see from the daily chart of GGP below, over the past several months, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern. An IH&S pattern is a strong bullish pattern. After the completion of the IH&S pattern, the stock may move higher in the short term.
Daily Chart GGP
#3 Golden Cross: When short-term moving average crosses above the longer-term moving average, it is called as Golden cross and indicate a possible upcoming bullish movement. The stock’s 50-day SMA had crossed above 200-day SMA, indicating bullishness.
#4 Oversold RSI: In the daily chart, the RSI is currently oversold, indicating a bullish setup.
#5 Hammer: The latest candle on the daily chart is a hammer which is a bullish candle.
#6 Weekly IH&S: The weekly chart of GGP also shows that an Inverted Head and Shoulders pattern is being formed currently. This is marked in the chart below. After an upmove, the stock corrected to around $19. Since then, the stock has been consolidating and has been forming an IH&S pattern on the weekly chart. The completion of this pattern would indicate that the earlier uptrend may resume.
Weekly Chart GGP
#7 Fibonacci Support Levels: The stock is currently trading near the 38.2% Fibonacci levels. This is a good level for a bounce back.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the shares of GGP at the current price of $21.59 and the rest once the stock breaks out of the IH&S pattern. This translates to a daily close above $24.30.
TP: Our target price is $36.
SL: To limit risk, place a stop loss below the shoulder of the IH&S pattern. This translates to $20.40. Note that this stop loss is on a closing basis.
Our target potential upside is almost 48% to 67% in the next 6 months.
- Entering at $21.59: For a risk of $1.19, our target reward is $14.41. This is a 1: 12 Risk-Reward trade.
- Entering at $24.30: For a risk of $3.90, our target reward is $11.70. This is a 1: 3 Risk-Reward trade.
In other words, this trade offers nearly 3x to 12x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the current levels before completing the formation of the Inverted Head and Shoulders pattern. 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.
Happy Trading!
Tara
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