The Kansas-based real estate investment trust company, QTS Realty Trust Inc. Class A (NYSE: QTS) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart of QTS, the stock was forming a falling wedge pattern for the past few months. This is marked as purple color lines. The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – QTS
#2 Above Supports: The stock is currently trading above its 50-day SMA as well as 200-day SMA. The stock is also trading above a resistance-turned-support area (marked as a blue dotted line). All these are possible support levels for the stock.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates possible bullishness.
#5 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a short-term downtrend.
This downtrend line is marked in the weekly chart in purple color. This is a possible bullish sign. The stock is also trading above its 50-week SMA, which also indicate bullishness.
Weekly Chart – QTS
#6 MACD above Signal Line: As you can see from the weekly chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#7 Oversold RSI Moving up: Relative strength index (RSI) is currently moving up after reaching oversold levels. This indicates the strength of the current upmove.
#8 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for QTS is if it closes above $46. However, those with a higher risk appetite can buy half the intended quantity of shares of QTS at the current price of $43.10.
TP: Our target prices are $50 and $60 in the next 4-6 months.
SL: To limit risk, place a stop loss below $40.50 (for entry near $43.10) and $43 (for entry near $46). Note that the stop loss is on a closing basis.
Our target potential upside is 9% to 39% in the next 4-6 months.
- Entry at $43.10: For a risk of $2.61, our first target reward is $6.89 and the second target reward is $16.89. This is a nearly 1:3 and 1:6 risk-reward trade.
- Entry at $46: For a risk of $2.30, our first target reward is $4.00 and the second target reward is $14.00. This is a nearly 1:2 and 1:6 risk-reward trade.
In other words, this trade offers 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with high 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 the energy sector.
Happy Trading!
Tara
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