The California-based real estate investment trust that invests in carrier-neutral data centers and provides colocation and peering services, Digital Realty Trust, Inc. (NYSE: DLR) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart of DLR, the stock has been forming a falling wedge pattern for the past several weeks. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out of the falling wedge pattern, indicating possible bullishness.
Daily Chart – DLR
#2 Double Bottom Pattern: Within the falling wedge pattern, the stock is currently forming a double bottom pattern. This is marked in the daily chart in orange color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards.
[hana-code-insert name=’adsense-article’ /]#3 Price above MAs: The stock is currently above both 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30.
This indicates possible bullishness.
#5 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color).
This indicates a possible bullish setup.
#6 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#7 Unbroken Uptrend: The weekly chart shows that the stock is still on an uptrend, as it has been forming higher highs and higher lows since the past several months. The price is also above the 50-week and 200-week SMA, indicating that the bulls are still in control.
Weekly Chart – DLR
#7 Bullish Stochastic: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#8 MACD Above Signal Line: In the weekly chart, 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, purchase shares of DLR above the breakout level of the double bottom pattern at around $117.
TP: Our target prices are $125 and $135 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $113.50. Note that the stop loss is on a closing basis.
Our target potential upside is 7% to 15% in the next 3-6 months. For a risk of $3.50, our first target reward is $8.00 and the second target reward is $18.00. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with 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!
Tara
[hana-code-insert name=’MMPress 2′ /]