3D Systems Stock Is Inches Away from a True Bull Market

DDD-stockDDD Stock: Waiting on a Confirmation

Anyone who has read my previous publications about 3D Systems Corporation (NYSE:DDD) stock is well aware that I am looking for a specific trigger so I can finally declare that a bull market in DDD stock has officially begun.

There have already been a number of indications that are suggesting that a new bullish trend has begun, but I am currently waiting for one last confirming indicator. 3D Systems stock continues to behave constructively, and this anticipated confirming indicator continues to draw closer.

All the indications that I have alluded to are all based on rules set out by technical analysis. Technical analysis is a method of investment analysis that is based on the notion that historical price and volume data can be used to forecast future prices. This is my preferred method for producing an investment view, and I have spent the better part of two decades refining my craft in this area.

The following 3D Systems stock chart illustrates the price action that suggests a bottom has been put in place.

DDD stock chart

Chart courtesy of StockCharts.com

The price chart above illustrates the bear market that obliterated the value in the 3D System’s share price. This obliterating bear market was defined by using a simple downtrend line. This simple trend line that contained the price was created by connecting the peaks on the price chart.

In January 2016, DDD was trading as low as $6.00, which represented a loss of 93.8% from the peak that was created in December 2013. It is not uncommon for a stock to lose 90% of its value after a speculative bubble finally bursts, and as a result, I have been looking for indications that a bottom has formed ever since 3D Systems stock lost 90% of its value.

In September 2016, DDD stock was finally able to garner enough strength to break above the downtrend line that contained the price for 2.5 years. This was the first indication that the bear market in 3D Systems had finally concluded. This indication was further reinforced when the price returned to test the downtrend line from above. This price action is referred to as a “backtest,” and this price action serves to reinforce the notion that the break above the downtrend line was legitimate.

The following price chart is presented using a monthly scale in order to illustrate an indicator that is suggesting that a new bullish trend has begun.

ddd stock chart

Chart courtesy of StockCharts.com

The price chart above illustrates the efficacy of moving average convergence/divergence (MACD) indicator. This simple and effective trend-following momentum indicator uses signal-line crosses to distinguish between bearish and bullish momentum. Bullish and bearish momentum helps determine whether the path of least resistance is toward higher or lower prices.

The monthly scale serves to smooth out the signal that is generated by the MACD indicator and to reduce noise. This indicator is known for its success in confirming the predominant trend.

In April 2014, this indicator generated a bearish cross indicating that bearish momentum had overwhelmed any bullish momentum and that the path of least resistance was toward lower prices. After this indicator was generated, shares proceeded to fall off a proverbial cliff.

In May 2016, this indicator generated a bullish cross, indicating that bullish momentum has finally overwhelmed any bearish momentum, and that the path of least resistance is now towards higher prices.

The bullish MACD indicator is still engaged, and this brings me to the following price chart that illustrates the indicator that will confirm that a bull market in 3D Systems stock has begun.

ddd chart

Chart courtesy of StockCharts.com

The price action off the lows that were generated in January 2016 have been constructive. Constructive price action consists of impulse waves that advance the price and consolidation waves that serve to alleviate overbought conditions and set up the next advancing impulse wave.

The impulse waves that developed off the lows was very impressive as DDD stock appreciated from a low of $6.00 to a high of $19.76. This surge was responsible for the breaking the downtrend line, and the generation of a golden cross.

A golden cross is a bullish signal that is produced when the 50-day moving average, highlighted in blue in the chart, crosses above the 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is on the horizon.

Multiple indicators are suggesting that a bullish trend has begun, but I am awaiting for the completion of the consolidation wave. The completion will occur when the price exits the pattern in an upward direction, indicating that a new advancing impulse wave has begun. The completion of this pattern is my smoking gun, and I believe that this pattern will be completed in the not-too-distant future.

The fact that the equity markets continue to forge new all-time highs on a daily basis only serves to reinforce the notion that this pattern will play out in a bullish manner.

Bottom Line on 3D Systems Stock

Indications continue to suggest that a bull market is developing in 3D Systems stock. I am awaiting one final confirming indicator that will, without a doubt, confirm the view that higher DDD stock prices are set to prevail.