After a strong run to the upside in the first half of November, the stock of Merlin Properties SOCIMI SA (BME: MRL) started coiling up and is now forming a triangle. Certainly, the triangle could be seen as a bullish pennant, which tends to break to the upside, according to the TA rules. However, given that the price is struggling to remain above its 200-day EMA, this makes us a bit more cautious about a possible continuation of the prevailing uptrend. As long as the boundaries of that triangle stay intact, we will take a neutral stance for now.
If, eventually, the stock ends up breaking the upper side of the aforementioned triangle and then moves above the highest point of November, at 8.26, that will confirm a forthcoming higher high, potentially clearing the path for larger advances. The next possible target might be seen at 8.98, marked by the highest point of June, a break of which could set the stage for a push to the 9.51 level. That level marks the high of March 17th.
Judging by the current positions of the RSI and the MACD on our daily chart, although both are still in positive territories, the two indicators are now pointing lower. In addition to that, the MACD continues to run slightly below its trigger line. This picture somewhat supports the idea of standing pat for now, until one of the sides of the triangle gets violated.
Alternatively, a break through the lower side of the aforementioned triangle and a further price-drop below the 7.75 zone, marked by the lows of November 30th and December 3rd, could increase the stock’s chances of moving further south. We will then aim for the 7.47 obstacle, a break of which may open the door for a move to the 6.86 hurdle, marked by the lows of September 14th and 30th. If the slide continues, the next potential target might be at 6.57, which is the low of September 24th.
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