Phoenix, Arizona based private, non-profit, Christian university, Grand Canyon Education Inc. (NASDAQ: LOPE) seems to be poised for a decline in its price in the near term as per its latest charts.
#1 Rising Wedge Pattern: The daily chart shows that the stock has been forming a rising wedge pattern during the past few months. This is a bearish pattern and is marked in blue color in the daily chart. The stock is currently near the top of this rising wedge pattern. If the stock breaks down from the bottom of the rising wedge pattern, it can move lower in the near-term.
#2 Bearish Candle: The latest candle is a bearish candle with a long upper shadow. This indicated that there was a selling pressure at higher prices. The stock had also closed well down from the day’s high. This is another bearish sign.[hana-code-insert name=’adsense-article’ /]#3 Bearish Divergence between RSI and Price: The daily chart shows that there is a bearish divergence between RSI and price.
This is marked as pink dotted lines. While the price was making higher highs, RSI was forming lower highs.
This is a possible bearish sign.
#4 CCI Moving Down: The CCI is currently moving down after attempting to cross above 100.
This usually means that the stock may reverse to downside soon.
#5 Supply area: As you can see from the weekly chart, the stock is currently trading near a supply area. This is marked as an orange rectangle. Whenever the stock attempts to cross above the top of this rectangle, it bounces back down, indicating that there is a distribution happening at this level. This is a bearish sign.
#6 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#7 Overbought Stochastic: The stochastic in the weekly chart is currently near overbought levels and moving down, indicating possible bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for LOPE is at the current price of $114.79.
TP: Our target prices are $105 and $95 in the next 3-6 months.
SL: To limit risk, place a stop loss at $120.50. Note that this stop loss is on a closing basis.
Our target potential downside is 9% to 17% in the next 4-6 months. For a risk of $5.71, our target rewards are $9.79 and $19.79. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
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