The leading provider of commercial real estate information, analytics, and online marketplaces, CoStar Group Inc. (NASDAQ: CSGP) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#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 purple 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.
Daily Chart – CSGP
#2 Bearish Candle: The latest candle is a shooting star which is a bearish candle. This bearish reversal candlestick pattern typically occurs at the top of uptrends and indicates that there is a selling pressure at higher prices. The stock had also closed 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 blue 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 crossing above 200.
This usually means that the stock may reverse to downside soon.
#5 Overbought Stochastic: The stochastic in the daily chart is currently near overbought levels and moving down. The %K line has also crossed below the %D line. All these indicate possible bearishness.
#6 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#7 CCI-Price negative divergence: The weekly chart shows that there is a bearish divergence between CCI and price. This is marked as blue dotted lines. While the price was making higher highs, CCI was forming lower highs. CCI is also moving down from overbought levels. This is a possible bearish sign.
Weekly Chart – CSGP
#8 Overbought Stochastic: The stochastic in the weekly chart is also near overbought levels and moving down. The %K line has also crossed below the %D line. All these indicate possible bearishness.
#9 RSI overbought: The RSI in the weekly chart is near overbought levels. This is a bearish sign.
#10 Bearish Candle: The latest candle being formed in the weekly chart seems like a bearish one.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on CSGP at the current price of $424.68.
TP: Our target prices are $400 and $380 in the next 3-6 months.
SL: To limit risk, place a stop loss at $435.50. Note that this stop loss is on a closing basis.
Our target potential downside is 6% to 11% in the next 3-6 months. For a risk of $10.82, our target rewards are $24.68 and $44.68. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x 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.
Happy Trading!
Tara
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