If This Stock Breaks Out, Buy It!

Global Ship Lease Inc. (NYSE: GSL) seems to be poised for a price surge as per its latest charts. The company owns and charters containerships of various sizes under fixed-rate charters to container shipping companies. GSL owns 65 mid-sized and smaller containerships with an aggregate capacity of 342,348 twenty-foot equivalent units.

Bullish Indications

#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has been forming a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple color lines. Once a stock breaks out of the symmetrical triangle pattern, it could move higher.

GSL – Daily Chart

#2 Strong RSI: The daily chart shows that RSI is above 50 and moving up, indicating strength.

#3 Price above 50-MA: The price is currently above the short-term moving average of 50-day SMA. This is a bullish sign.

#4 %K above %D: The %K line (blue color) is currently above the %D line (orange color) in the stochastic and is also moving higher from oversold levels. This is a bullish sign.

#5 Bullish ADX: The +DI line is starting to move up from below the –DI line in the daily chart. The ADX line is also currently starting to move higher from below the +DI and –DI lines. This indicates possible bullishness.

#6 Flag Pattern: As seen from the weekly chart, the stock was in an uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in pink color lines on the chart. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case. The stock is also trading above its 200-week SMA, indicating that the bulls are firmly in control.

GSL – Weekly Chart

#7 Strong RSI: The weekly chart shows that the RSI is moved higher from oversold levels and is currently nearing 50. This is a possible bullish sign.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for GSL is above the price of around $18.80.

TP: Our target prices are $21 and $23 in the next 4-6 months.

SL: To limit risk, place stop-loss at $17.50. Note that the stop-loss is on a closing basis.

Our target potential upside is 12% to 22% in the next 4 to 6 months.

For a risk of $1.30, our target rewards are $2.20 and $4.20. This is a 1:2 and 1:3 risk-reward trade.

In other words, this trade offers nearly 2x to 3x more potential upside than downside.

Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern with a high volume. 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!


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