The real estate investment trust company headquartered in Washington DC, Easterly Government Properties Inc. (NYSE: DEA) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: DEA’s daily chart shows that the stock has been recently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level. Currently, the stock has broken out of the ascending triangle pattern, which is usually a bullish sign.
Daily Chart – DEA
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#4 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#5 IH&S Pattern: From the weekly chart, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart in pink color. An IH&S pattern is a bullish pattern.
A breakout from an IH&S pattern is usually the sign of an upcoming bullish move. Currently, the stock has broken out of the IH&S pattern, indicating a possible bullish bias.
Weekly Chart – DEA
#6 Downtrend broken: From the weekly chart, we can see that the recent downtrend has been broken. The downtrend line is marked in purple color. The stock has also moved above the 50-week SMA< which is a possible bullish sign.
#7 Other positive indicators: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal. The stochastic also indicate bullishness, as the %K line is above the %D line.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy the shares of DEA at the current price of $18.78.
TP: Our target prices are $22 and $30 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $16.70. Note that this stop loss is on a closing basis.
Our target potential upside is 17% to 60% in the next 4-6 months. For a risk of $2.08, the target rewards are $3.22 and $11.22. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. 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 its sector.
Happy Trading!
Tara
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