The Chicago-based real estate investment trust company, Equity Lifestyle Properties, Inc. (NYSE: ELS) 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 ELS is recently forming a rising wedge pattern during the past few months. This is a bearish pattern and is marked in pink color in the daily chart. Once a stock breaks down from the bottom of the rising wedge pattern, it typically moves lower in the near-term. The stock is currently near the bottom rail of the falling wedge pattern, indicating bearishness.
#2 Bearish Divergence between RSI and Price: The daily chart shows that there is a bearish divergence between RSI and price.
This usually indicates the possibility of an upcoming bearish move.
This bearish divergence is marked as blue dotted lines.
#3 Bearish Candle: The daily chart shows that a bearish candle was formed last day, with a long upper shadow.
This is a possible bearish sign.
#4 RSI-Price Bearish Divergence: The weekly chart also shows a bearish divergence between RSI and price.
This is because while the price was making higher highs, RSI was forming lower highs. This usually indicates the possibility of an upcoming bearish move. This bearish divergence is marked as blue dotted lines.
#5 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.
#6 Bearish RSI: The RSI is currently moving down after reaching overbought levels in the weekly chart. This is also a possible bearish indication.
#7 CCI down: The CCI is moving down after reaching above +200 in the weekly chart, indicating possible bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on ELS if it closes below $115.
TP: Our target prices are $110 and $100 in the next 3-6 months.
SL: To limit risk, place a stop loss at $117.80. Note that this stop loss is on a closing basis.
Our target potential downside is 4% to 13% in the next 3-6 months. For a risk of $2.80, our target rewards are $5.00 and $15.00. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 5x 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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