America’s largest online lending marketplace that connects borrowers with multiple lenders so they can find the best deals on loans, credit cards, deposit accounts, insurance and more, Lendingtree Inc. (NASDAQ: TREE) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Rising Wedge Pattern Breakdown: The daily chart shows that TREE has recently broken down from a rising wedge pattern that was formed during the past few months. This is a bearish pattern and is marked in blue 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.
Daily Chart – TREE
#2 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
[hana-code-insert name=’adsense-article’ /]#3 Bearish ADX and DI: The ADX and DI indicator show that (+DI) < (-DI); ADX and (-DI) are above (+DI); and ADX has started rising from below both (+DI) and (-DI).
All these points to possible bearishness.
#4 Bearish Aroon: The Aroon indicator shows bearishness as the Aroon up is below 30 and the Aroon down is above 70.
#5 Price below MAs: The stock is currently trading below the 50-day as well as 200-day SMA, which indicates that the bears are currently gaining control.
#6 Bearish Stochastic: The stochastic in the weekly chart is currently moving down. The %K line has also crossed below the %D line. All these indicate possible bearishness.
Weekly Chart – TREE
#7 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color) in the weekly chart, indicating bearishness.
#4 Bearish Divergence between Stoch and Price: The weekly chart shows that there is a bearish divergence between Stochastic and price. This is because while the price was making higher highs, Stoch was forming lower highs. This usually indicates the possibility of an upcoming bearish move. The bearish divergence is marked as blue dotted lines.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for TREE is if it moves up and reaches the resistance level of $350.
TP: Our target prices are $325 and $300 in the next 3-6 months.
SL: To limit risk, place a stop loss at $363. 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 $13.00, our target rewards are $25.00 and $50.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x 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.
Happy Trading!
Tara
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