One of America’s major insurance providers that specializes in home, auto, life, and health insurance products for individuals, families and small businesses, Kemper Corp (NYSE: KMPR) seems to be poised for a decline in its price in the near term as per its latest charts.
#1 Descending Triangle Breakdown: The daily chart shows that the stock has been forming a descending triangle pattern during the past few months. This is a bearish pattern and is marked in purple color in the daily chart. The stock has currently broken down from the descending triangle pattern. A breakdown from a bearish pattern like descending triangle pattern usually indicates that the stock could move lower in the near-term.
#2 Price below MAs: The stock price is currently below both 50-day as well as 200-day SMA. This is a bearish sign.[hana-code-insert name=’adsense-article’ /]#3 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#4 %K below %D in Stochastic: The %K line is now below the %D line in stochastic.
This indicates possible bearishness.
#5 Broken Uptrend: The weekly chart shows that the uptrend of the stock has been broken.
This uptrend line is shown in purple color in the weekly chart.
The stock is also below the 50-week SMA, indicating that the bears are now in control.
#6 %K below %D in Stochastic: The %K line is currently below the %D line in stochastic of the weekly chart as well. This indicates possible bearishness.
#7 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color) in the weekly chart, indicating bearishness.
#8 Bearish Aroon: The Aroon indicator shows that Aroon Up (Orange line) is below 30 and Aroon Down (blue line) is above 70. This is a bearish sign.
#9 Head and Shoulders Pattern: There is a head and shoulders pattern formed on the weekly chart. This is marked in orange color lines. A head and shoulders pattern is a bearish pattern and a breakdown from it usually indicates that the stock may move lower.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on KMPR if the stock moves back to the breakdown level of the descending triangle pattern at around $71.
Note: For those with a higher risk appetite, you can enter short positions on half the intended quantity of stocks at the current price of $67.05.
TP: Our target prices are $58 and $50 in the next 3-6 months.
SL: To limit risk, place a stop loss at $74.80. Note that this stop loss is on a closing basis.
Our target potential downside is 18% to 30% in the next 3-6 months.
- Entry at $71: For a risk of $3.80, our target rewards are $13.00 and $21.00. This is a nearly 1:3 and 1:6 risk-reward trade.
- Entry at $67.05: For a risk of $7.75, our target reward (TP#2) is $17.05. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 6x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the descending triangle 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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