The American company that owns exchanges for financial and commodity markets, and operates 12 regulated exchanges and marketplaces, Intercontinental Exchange Inc. (NYSE: ICE) seems to be poised for a decline in its price in the near term as per its latest charts.
#1 Head and Shoulders Pattern: As you can see from the daily chart below, the stock has been forming a head and shoulders (H&S) pattern. This pattern is marked in pink color lines. A head and shoulders pattern is a bearish pattern and a breakdown from it usually indicates that the stock may move lower.
#2 Bearish ADX and DI: The ADX indicator shows bearishness as (+DI) is currently below (-DI).
[hana-code-insert name=’adsense-article’ /]#3 Price below MAs: The price is currently below both 50-day as well as 200-day SMA in the daily chart, indicating that the bears are currently in control.
#4 Bearish RSI: The RSI is currently below 50 and moving down, indicating possible bearishness.
#5 Broken Uptrend: The weekly chart shows that the stock has broken down from its current uptrend.
The uptrend line is marked in pink color in the weekly chart below.
The stock attempted to cross above the uptrend line again but was not able to sustain the upmove.
A breakdown from an uptrend line usually indicates a bearish bias.
#6 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color). This typically indicates possible bearishness.
#7 Price below MA: The price is below the 50-week SMA of the weekly chart. This is a possible bearish sign, as it shows that the bears are currently in control
#8 Bearish RSI: The value of RSI is currently below 50 and moving down. This indicates possible bearishness.
#9 Bearish ADX and DI: The ADX and DI indicate bearishness. This is because (+DI) < (-DI) and ADX is below both (+DI) and (-DI) and slowly rising. All these points to possible bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level is if the stock breaks down from the Head and Shoulders Pattern and the price crosses below $70.
TP: Our target prices are $65 and $60 in the next 3-6 months.
SL: To limit risk, place a stop loss at $72. Note that this stop loss is on a closing basis.
Our target potential downside is 7% to 14% in the next 3-6 months. For a risk of $2.00, our target rewards are $5.00 and $10.00. This is a nearly 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 5x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the H&S 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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