This Is Why Bluebird Stock Will Soar into the Sky in 2017

BLUE stockBlue Stock: Reinforced Bullish Trend

The best part about my job is the excitement that I receive when I find a compelling investment. In late November 2016, I stumbled upon bluebird bio Inc (NASDAQ:BLUE) stock, after I came across a piece of intriguing news surrounding one of its clinical trials that delivered exceptional results with absolutely no side effects. This news piqued my interest and I began to dig.

I base my investment views using technical analysis and, as result, my views are heavily reliant on the indicators and price patterns that are contained within the price chart. As I delved closer into the price chart for Bluebird, I found such beauty in its inner workings. The indicators and price patterns have been so defined and pristine that Blue stock now tops my watch list as I am compelled to believe that much higher prices are now a real possibility.

The following Bluebird stock chart illustrates the inner workings that I was referring to.

Bluebird Stock chart

Chart courtesy of StockCharts.com

A cross of the 50-day and 200-day moving averages has been instrumental in confirming the predominant trend. A bearish cross has confirmed that a downtrend was in force, and a bullish cross has confirmed that a bullish trend was in force. Traders refer to these indications as bearish death crosses and bullish golden crosses. A signal is generated when the faster moving average (50-day moving average) moves above or below the slower moving average (200-day moving average).

In early October 2015, a death cross was generated, confirming that a bear market had already begun, and the sell-off that followed was a testament to the accuracy of this indicator.

In early September 2016, a golden cross was generated, indicating that a bull market had begun, and this is where I would be on the lookout for bullish trading setups.

The golden cross was not the the first indication that the tides had changed. An ending triangle was in development for much of 2016. On average, this pattern emerges as a continuation pattern, but what separates this pattern from that stipulation is the direction in which the price exits the pattern. When the price exited the pattern in July 2016, in the opposite direction of the one it entered the pattern in, it served to act as a powerful trend reversal indicator.

The sell-off that followed later in the year did little to change the bullish picture that was in development. In fact, the price action that followed served to reinforce the bullish notion. This price action was characterized as a “backtest,” where the price returns to test a previous level of resistance from above. This reinforces the view that the direction that the price exited out of the ending triangle was legitimate, and it also laid the groundwork toward a new bull market.

The following Bluebird stock chart illustrates further developments that continue to reinforce the bullish view.

Bluebird Stock chart

Chart courtesy of StockCharts.com

A downtrend had contained the price after BLUE stock peaked in June 2015. This downtrend was created by using a simple trend line and connecting the peaks on the price chart. This trend line serves as a simple tool that defines whether Bluebird is trading within a bear market or not. Trading below it indicated that a bear market was still in force, and trading above it indicated that the bear market had concluded.

It was November when Blue stock was finally able to garner enough strength to break out above this trend line. The breakout indicated that the bear market had finally run its course, and the backtest that followed confirmed this notion. In some circles, traders refer to the backtest as one last kiss goodbye before the new trend reasserts itself.

Following the backtest, Bluebird stock accelerated to the upside. New 52-week highs are now a common theme, as there is little doubt that the previous bear market is now back in hibernation.

The following Blue stock chart illustrates the bullish price action that supports the notion of higher prices.

Bluebird Stock chart

Chart courtesy of StockCharts.com

The price chart above illustrates a bullish picture that is driven by constructive price action. This 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 impulse wave.

This wave structure is particularly constructive because it not only discerns trends, but can also be used to generate a potential price objective. Exiting the pattern in the upward direction suggests that the next prevailing move will be higher, and the theory surrounding this wave structure suggests that $103.00 is a potential price objective. The price objective was obtained using the consolidation wave as a midpoint.

Bottom Line on Bluebird Stock

I am bullish in Bluebird stock, because all the indications that were generated on the BLUE stock chart support this view. I will continue to believe that higher prices are likely until these indications suggest otherwise.