The Dallas-based real estate investment trust company, CIM Commercial Trust Corp (NASDAQ: CMCT) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: CMCT’s daily chart shows that the stock has broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – CMCT
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /] #3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates bullishness.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#6 Consolidation and Breakout: The weekly chart shows that the stock had recently consolidated for a while before finally breaking out from the consolidation area. This area is marked in green rectangle in the weekly chart below. A breakout after a consolidation usually indicates that the stock has gained momentum and may move higher in the near-term.
Weekly Chart – CMCT
#7 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#8 MACD Above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is also 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 of CMCT is if the stock corrects back to the breakout level of ascending triangle pattern at around $15.50. But for those with a higher risk appetite, you can purchase half the intended quantity of stocks at the current price of $16.95
TP: Our target prices are $25 and $35 based on the breakout from Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $14.50. Note that this stop loss is on a closing basis.
Our target potential upside is 48% to 126% in the next 3-5 months.
- Entry at $15.50: For a risk of $1.00, the target rewards are $9.50 and $19.50. This is a nearly 1:10 and 1:20 risk-reward trade.
- Entry at $16.95: For a risk of $2.45, the target rewards are $8.05 and $18.05. This is a nearly 1:3 and 1:7 risk-reward trade.
In other words, this trade offers nearly 3X to 20X 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 breakout level. 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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