SFUN Stock: Targeting a Dynamic Price Objective
The markets sold off in late January, and it marked the beginning of a turbulent market environment. Many pundits were coming out of the woodwork suggesting that this was the beginning of worse to come, stoking fear among investors.
I had my own views, so I outlined why I believed this move toward lower prices was nothing more than a much-needed correction in a bullish trend. This stance implied that the markets were likely to find their footing and higher index values would once again prevail.
I must admit that maintaining this bullish view was not an easy task, and just as I began to second-guess my sentiment, something happened on May 16, 2018, which I believe has vindicated my bullish view. That something was the Russell 2000 index forging a new-all time high.
The Russell 2000 is the small-cap index. If small-cap stocks are making new highs, then this strongly suggests that markets are poised to stage a move toward higher values. One stock I believe that will participate in the advance is Fang Holdings Ltd (NYSE:SFUN).
Yes, Fang Holdings Ltd stock falls into the small-cap space with a market cap of $2.4 billion, but the main reason why I believe SFUN stock is likely to stage an advance is because a number of technical indications generated on the Fang Holdings stock chart are currently supporting such an outcome.
The first indication suggesting that SFUN stock is likely to advance is a completed technical price pattern, which is highlighted on the following stock chart.
Chart courtesy of StockCharts.com
The completed technical price pattern highlighted on the SFUN stock chart is a descending channel. A descending channel is characterized by price action that consists of a sequence of lower highs and lower lows, which, by definition, is a bearish trend.
Capturing this pattern was achieved by connecting the respective levels of lower highs and lower lows. This process created two downward-sloping trend lines that were used to define levels of price resistance and price support.
Using this pattern is quite simple; as long as Fang Holdings stock is contained within these trend lines, the bearish trend is set to persist. The ramifications of this pattern can only be negated when the Fang Holdings stock price either breaks above price resistance or falls below price support.
On April 25, 2018, when SFUN stock was testing price support outlined by the descending channel, it coincided with a test of the 200-day moving average.
The 200-day moving average acts as a dividing line that separates bullish stocks from bearish ones. A stock trading above it is a bullish sign, while one trading below it is bearish, and it not uncommon for this metric to act as a significant level of price support or resistance.
Soon after SFUN stock touched the 200-day moving average, the stock price staged a move toward higher prices, and resistance outlined by the descending channel was broken. This event is marked as a breakout on the stock chart, and it negates the bearish implications implied by the descending channel, while simultaneously suggesting that SFUN stock is now free to appreciate.
In order to quantify the ramifications of this event, a longer-term view is required. As a result, one has been provided on the following Fang Holdings stock chart.
Chart courtesy of StockCharts.com
This SFUN stock chart captures a trend that has been in development since March 2017, after Fang Holdings stock bottomed at $2.46.
This trend contains a series of higher highs and higher lows, which is the quintessential characteristic that defines a bullish trend.
Capturing this trend was done in the same fashion as the descending channel, by connecting the peaks and troughs that encompassed the series of higher lows and higher highs. This process created two upward-sloping trend lines, which have defined an ascending channel.
Using this pattern is quite simple, and as long as SFUN stock is contained between the two trend lines, I can only assume that a bullish trend is in development and that higher Fang Holdings stock prices will therefore prevail over time.
The descending channel that was highlighted earlier developed inside this ascending channel, and in April 2018, when the 200-day moving average was tested, it coincided with a test of support outlined by this ascending channel.
The timing was too perfect to suggest it was a mere coincidence that all these metrics were tested when they all coincided around one price point. This was a significant event, and it is why higher Fang Holdings stock prices have since prevailed.
Going forward, I can only assume that resistance outlined by the ascending channel is likely to be tested in the near future. This metric currently resides at $6.80, but due to its upward slope, the longer it takes to get there, the higher the price objective becomes.
Fang Holdings stock has completed a technical price pattern within a bullish trend. This event implies that this trend toward higher SFUN stock prices is still in development.