Medical Properties Trust Inc (NYSE:MPW) experienced a remarkable surge of close to 17% on Monday, catching the attention of investors and analysts alike. This surge can be primarily attributed to short covering, as MPW is one of the most shorted stocks on the NYSE, with approximately 38% of its float being short. The rally on Monday was part of a broader trend observed in heavily shorted stocks.

Despite facing challenges such as the bankruptcy declaration of one of its key tenants, Steward, Medical Properties Trust managed to deliver solid results for the first fiscal quarter of 2024 on May 9th. The company reported robust earnings, supported by normalized funds from operations (NFFO), which covered its dividend payout of $0.15 per share.

The bankruptcy filing by Steward presents both challenges and opportunities for Medical Properties Trust. While the impairment charges related to Steward’s bankruptcy had an impact on MPW’s financials, the company now has the opportunity to restructure its tenant portfolio and de-risk its assets. The potential transition of hospitals to more financially stable operators could lead to increased funds from operations for MPW in the future.

Furthermore, Medical Properties Trust has been proactive in managing its balance sheet, with plans to divest assets worth over $2.0 billion in FY 2024. This strategic move is aimed at reducing debt and improving the company’s financial flexibility. Despite the uncertainty in the market, MPW’s attractive valuation and high safety margin continue to make it an appealing investment option for many.

Now, let’s delve into a technical analysis of Medical Properties Trust to uncover insights into its recent surge and what the charts might reveal about its potential movement in the coming days.

Medical Properties Trust was one of the better-performing REITs only a few years back and its long-term chart reflects that. Back in 2020, the REIT was trading comfortably above $20 reaching a high of $24.13 in January 2022. However, after making that high, the stock started a slow but steady descent that saw it bottoming out earlier this year below $3.

MPW chart by TradingView

Since bottoming out in January, the stock has been on an upward trajectory that has seen it taking support multiple times near $4 levels. For investors who have recently bought the stock, or are holding it, another breach below $4 can be devastating as that will suggest that the REIT has still not come out of trouble. Hence, our advice would be to hold the stock as long as it trades above $3.90 and to sell it if it falls below that.

On Medical Properties Trust’s hourly chart, we can see that the stock has largely traded in a $4-$5 range since March. However, yesterday’s move that took the stock above $6 and yesterday’s close above $5 have confirmed a bullish breakout.

MPW chart by TradingView

In the short-term, bulls are in complete control of the stock, hence traders who are bearish on the stock must avoid shorting it unless it again starts trading below $5. Traders who are bullish on the stock can initiate a long position at current levels but will have to put a wide stop loss at $3.9, which is 30% below where the stock is currently trading. If the bull run continues the stock can reach $7.4 in the coming days where they can start booking profits.

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