The alternative asset management company that was founded in 1986 to invest in real estate and manage real estate related businesses, RMR Group Inc. (NASDAQ: RMR) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Pattern: The daily chart of RMR shows that the stock has been trading within a falling wedge pattern during the past few months. This is marked in the chart in purple color. Currently, the stock has broken out from the top rail of the Falling Wedge Pattern. This usually indicates that it has the potential to move further up.
Daily Chart – RMR
#2 Bullish RSI: RSI is currently above 50 and moving up, indicating the strength of the current upmove.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#4 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines.
The +DI line is also currently above –DI line. This indicates possible bullishness.
#5 Near Support Level: As seen from the weekly chart, the stock had recently bounced back from a strong support level.
This area is marked as an orange dotted line in the weekly chart below.
The stock had previously taken support near this area before bouncing higher. This seems like a good area for the stock to start moving higher.
Weekly Chart – RMR
#6 RSI– Price bullish divergence: There is a bullish divergence between RSI and price as seen in the weekly chart below. While the price formed a lower low, the RSI formed a higher low. This is marked as blue dotted lines in the weekly chart. The RSI is also moving up after reaching near oversold levels. These are all possible bullish signs.
#7 Reversal Candle: The weekly chart shows that the stock had formed a reversal candle (long tailed green candle) last week after a short-term downtrend. This candle is also near the support area. This seems like a possible bullish sign.
#8 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the weekly chart as well. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy price for the stock is above the upper wick of the latest candlestick of the daily chart, which translates to a price of around $51.
TP: Our target prices are $60 and $70 in the next 3 to 6 months.
SL: To limit risk, place a stop loss below $47.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 18% to 37% in the next 3-6 months.
For a risk of $3.50, our first target reward is $9.00 and the second target reward is $19.00. This is a nearly 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x 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 falling wedge 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 the sector.
Happy Trading!
Tara
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