3D Systems Corporation: Awaiting the Running of the DDD Stock Bull

3D Systems Corporation StockDDD Stock: Awakening the Bull

I became bullish on 3D Systems Corporation (NYSE:DDD) stock this summer because I had reason to believe that the bear that ravaged the share price of DDD stock had decided that it was finished doing its worst and that it was time to hibernate once again.

Price bubbles are formed all the time, and when they burst, it is not uncommon for the share price to reverse and drop to levels that seem unimaginable. In many cases, these investments lose over 90% of their value before a bottom is finally formed. This is the unfortunate aftermath of a bubble bursting.

As a result, when I come across an investment that has lost 90% of its value, I begin to look for reasons that would suggest that the bear market has ended and that a new bull market is forming.

DDD stock fulfils this criteria, and I have found a number of reasons why I believe the bear market in 3D Systems stock has ended.

I also believe that DDD stock is attempting to put in a constructive bottom. This has the potential to awaken the bull–the bull that many investors now believe will never awaken again.

The following 3D Systems stock chart illustrates the first signal that suggested that the bear market was losing its ferocity:

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Chart courtesy of StockCharts.com

In April 2016, DDD stock generated a golden cross. A golden cross is a bullish signal that is produced when a faster 50-day moving average (the blue line) crosses above a slower 200-day moving average (the red line). Traders use this signal to confirm that a bull market is on the horizon. It is always wise to trade in the direction of this momentum indicator because it generates a bullish tailwind in which the path of least resistance is higher.

This indicator was instrumental in setting up the following bullish development that is illustrated on the 3D Systems stock chart below:

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Chart courtesy of StockCharts.com

Since DDD stock peaked in late 2013, a bearish downtrend line has formed. This downtrend defined by the trend line (highlighted in blue) is created by connecting the peaks on a price chart. A downtrend, by definition, is a price trend of lower lows and lower highs. It can easily be identified as the price moves from the upper left to the lower right. This is a clear example of a relentless bearish trend.

The golden cross that was generated in April 2016 produces the necessary bullish tailwinds to finally break above this downtrend line via a price breakout. It also signaled that the bearish trend toward lower prices had ended.

It is not uncommon for a price to return and test a previous level of resistance from above, and this is exactly what occurred in early November 2016, when the price backtested the trend line and remained above it. This price action reaffirms that the bear market in DDD stock has ended.

Now that I have some supporting evidence that the bear market has ended, I am awaiting the bull to show its face.

The following 3D Systems stock chart illustrates the bullish developments that are alluding to a bullish outcome:

dddcorrection

Chart courtesy of StockCharts.com

The 3D Systems stock chart above is a perfect example of healthy bullish price action. Healthy price action consists of impulse waves that take the stock price higher, plus consolidation waves where the new higher price is digested and any overbought conditions are alleviated. Consolidation waves are essential in a bullish trend because they set up the next prevailing impulse wave.

The surge in price off of the January lows, highlighted in green, constitutes an impulse wave, while the price action that followed, highlighted in purple, constitutes the consolidation wave.

Impulse waves that are separated by a consolidation wave have a tendency to mirror each other in terms of length and duration. As a result, a break above the consolidation wave would project a bullish price objective of $24.00. It would also confirm that a new bull market in DDD stock has begun.

Bottom Line on 3D Systems Stock

The bullish developments in 3D Systems stock that began earlier this year continue to evolve. When the consolidation wave is finally completed and the price breaks above it, that will indicate that the bull has awoken and that higher prices in DDD stock are set to prevail.