DDD Stock: A Bull Market is Born
3D printing is an incredible technology and, when I first came across this revolutionary technology, it really blew my mind. The number of applications that can benefit from these devices is unreal. These printers will revolutionize the world. My excitement about this technology was exuberant, and I was not alone in my thinking. The excitement surrounding 3D printing led to an increased amount of hype that drove investment demand. 3D Systems Corporation (NYSE:DDD) stock hit an all-time high of $97.28 in December 2013.
The excitement finally subsided when people quickly realised that the concept is great, but the ability for these companies to produce a profit may not come until sometime in the distant future. The rise in this stock was unprecedented, and the fallout was spectacular.
There is good news in my rant though. I have reason to believe that the trend has finally reversed. I use price charts to decipher stock trends, and a number of signals are flashing and confirming a trend reversal.
The following chart illustrates a signal that first suggested that a trend reversal was in the making.
Chart courtesy of StockCharts.com
A moving average cross warned that a bear market was on the horizon.
On April 17, 2014, DDD stock generated a “death cross.” A death cross is a bearish signal that is produced when the 50-day moving average, highlighted in blue, crosses below the 200-day moving average, highlighted in red. Traders use this signal to confirm that a bear market is on the horizon. These signals are not always perfect but, if a trader followed this signal, he or she would have avoided a potential 87.5% loss. This instance proves why it is always wise to pay heed to this signal.
The same signal that warned of a bear market is now alluding to a bull market, as a “golden cross” was generated on April 11. A golden cross is the exact opposite of a death cross. I have already explained why it is wise to pay heed to this signal. I can only justify being long or neutral in the face of such a signal.
The following chart pattern confirmed that a trend reversal was in the making.
Chart courtesy of StockCharts.com
The downtrend that is highlighted in blue on the chart above is bearish trend. It is produced by connecting the peaks on the price chart. This is probably the single most important tool I have in my investing toolbox. A simple trend can help discern a trend and identify significant points of support and resistance. As long as the share price remains below the trend line, the bias for trading is bearish. In order for the bias to change, the price needs to cross above the trend line, at which point it will signal a trend reversal.
On August 23, DDD stock broke above the downtrend line, signalling a breakout. This is an extremely exciting event. A trend reversal had now been confirmed, and is being supported by a golden cross.
The Bottom Line on DDD Stock
DDD stock is major player in the 3D printing business segment. This technology will revolutionize our lives in the near future, and I have little doubt regarding that premise. DDD stock has fallen from great heights, but I believe the collapse in share price has run its course. The charts are suggesting that a new bull market has dawned, as the break of the downtrend has sent the bear crawling back into its cave to hibernate.