HCP, Inc. (NYSE: HCP)

HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. It primarily invests in properties serving the healthcare industry including sectors of healthcare such as senior housing, life science, medical office, hospital and skilled nursing. The fund also invests in mezzanine loans and other debt instruments. It engages in acquisition, development, leasing, selling and managing of healthcare real estate and provides mortgage and other financing to healthcare providers. The fund benchmarks the performance of its portfolio against the S&P 500 Index, Berkshire Hathaway Index, and MSCI REIT Index. HCP, Inc. was formed in 1985 and is based in Long Beach, California with additional office in Nashville and San Francisco.

To review potential trading opportunities with HCP’s stock, please take a look at the 1-year chart of HCP (HCP, Inc.) below with my added notations:

1-year chart of HCP (HCP, Inc.)

HCP has rallied nicely from it’s October low of $33. The stock has now formed what appears to be a Double Top price pattern (red). Double Tops are reversal patterns and are as simple as they sound: Rallying up to a peak (T), selling off to a support, and then rallying back up again to approximately the same top (T). As with any price pattern, a confirmation of the pattern is needed. HCP would confirm this pattern by breaking the $44 support (blue), which was also a previous resistance.

Keep in mind that simple is usually better. Had I never pointed out the Double Top pattern, one would still think this stock is moving lower if it simply broke through the $44 support level. So, whether you noticed the pattern or not, the trade would still be the same.

The Tale of the Tape: HCP has formed a Double Top with a $44 support level. Although a long trade could be entered on a pullback to the $44, the topping pattern seems to imply an impending break of support. If that happens, a short trade should be placed with a stop set above $44.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT