3D Systems Corporation: DDD Stock has HUGE Upside

DDD StockDDD Stock: Countdown to Launch

There is little to refute that the best time to buy an investment is as it transitions from a bearish trend to a bullish one. It is almost impossible to catch the exact bottom, but if I use my systematic approach to investing, I can try to catch the trend as my signals confirm the direction of the trend. 3D Systems Corporation (NYSE:DDD) stock is a great example to help illustrate my systematic approach to investing.

In order for me to generate a trading bias, a market signal needs to suggest a bias, and at least one other signal needs to confirm this bias. It is imperative that the signals are aligned in order to help discern a trend. Generating a profit is founded on being on the right side of this trend.

The following DDD stock chart illustrates the defining moment that suggested that a trend reversal was in play.

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Chart courtesy of StockCharts.com

The downtrend that has developed in 3D Systems stock is clear as day, and is defined by the trend line (highlighted in blue). This line is created by connecting the peaks on the DDD stock chart. A downtrend is defined by lower lows, confirmed by lower highs. There is no mistaking this trend as the price moves from the upper left to the lower right. This is a clear example of bearish price action. Shares will continue to trade with a bearish bias for as long as the trend remains intact.

In August, 3D Systems stock finally garnered enough bullish pressure to finally break above this downtrend line. This breakout is highlighted in pink on the chart above. There was evidence of a possible breakout, as a bullish signal preempted this move higher, and is illustrated on the DDD stock chart below.

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Chart courtesy of StockCharts.com

In April, DDD stock generated a golden cross. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. This signal is an effective tool used by many traders to confirm that a bull market is on the horizon. I find it always wise to trade in the direction of this signal. Long and neutral positions are warranted under such conditions.

Traders also use moving averages as trend-following tools. The slope of the moving average determines the trend. Having two moving averages reaffirms the trend in question. 3D Systems stock has both the 50 and 200-day moving averages sloping higher. Trend followers using this signal will have a bullish trading bias.

The trading action on the DDD stock chart below illustrates the bullish price action that further reaffirm my bullish bias.

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Chart courtesy of StockCharts.com

The bullish action on the chart above is defined by the price action. Bullish trends are constructed with impulse waves that are followed by consolidation waves. Once the consolidation is complete, a new impulse wave can develop.

Impulse waves usually come in pairs. It is very rare to find one impulse wave that is not followed up by another impulse wave. The impulse wave above is highlighted in green, and is approximately $13.00 in length. If I use the length of this wave and extrapolate it above the bottom of the consolidation, I get a target of $25.00. The consolidation wave is unconventional: as a rounded bottom is playing out, the lows on the rounded bottom coincide with support produced by the 200-day moving average. A new impulse wave will be confirmed when the previous high at $20.00 is breached. It is worthy to note that this pattern will become null and void if the price of 3D Systems stock falls below the 200-day moving average.

The Bottom Line on 3D Systems Stock

3D Systems stock has been a poor investment for many. I have reason to believe—based on signals that I garnered from the price chart—that the major prevailing trend for DDD stock is now in the upward direction. My bias will remain bullish until the chart signals give me reason to believe otherwise.