BBD.B Stock: Making Bullish Progress
This update on Bombardier, Inc. (TSE:BBD.B) stock has come a little quicker than I originally expected but, nonetheless, there have been new developments that must be addressed.
In my previous publication about this stock, “Bombardier Stock Is Setting Up Its Next Move,” I outlined a technical price pattern that was in development. This technical price pattern was setting up the next major move in BBD.B stock, and the completion of this price pattern would indicate the next direction in which Bombardier stock was heading.
To quickly clarify for anyone who hasn’t frequented any of my previous publications, it’s worthy to note that my views on a potential investment are based on my ability to analyze a company’s stock chart. This method of investment analysis, known as technical analysis, is predicated on the notion that historical price and volume data can be used to forecast the future direction of the stock price in question.
This method of investment analysis has been instrumental in correctly suggesting the next direction of Bombardier stock since I started writing about BBD.B stock last summer.
The following Bombardier price chart illustrates the completed technical price pattern that is serving to suggest that a higher stock price is likely.
Chart courtesy of StockCharts.com
The price chart above illustrates that Bombardier shares just exited a consolidation wave via a breakout.
A consolidation wave is one of two alternating waves which constitute constructive price action. The first wave is an impulse wave, and it is highlighted in green on the chart above. The impulse wave defines an advancement in the price of an investment.
The second wave is a consolidation wave, and it is highlighted in purple on the chart above. The consolidation wave defines the area where an investment sets up the necessary conditions for a new impulse wave to develop. This alternating wave structure creates the necessary ingredients for an orderly trend to develop, and remain sustainable.
The exit from the consolidation wave in an upward direction serves to suggest that the consolidation wave is complete, and that a new advancing impulse wave is set to develop. Therefore, a higher stock price can be expected. This bullish resolution of the consolidation wave came as no surprise because it was developing right on top of the 200-day moving average.
The 200-day moving average acts as the dividing line between healthy stocks trading in a bull market versus unhealthy stocks trading in a bear market. Using this moving average as an indicator is quite simple, if the share price is above the moving average, the implications are bullish. If the share price is below the moving average, the implications are bearish.
The 200-day moving average was acting as a level of price support as this consolidation was in development. Investors were eager to step in and support this moving average on multiple occasions, indicating the inherent bullish strength of this investment at the time that the consolidation wave was in development.
Now that the consolidation wave is complete and I have established the direction of the next move, the question remains as to what the next logical price objective is for BBD.B stock.
The following Bombardier stock chart illustrates a significant level of price resistance which should act as the next logical potential price objective for the stock price.
Chart courtesy of StockCharts.com
The price chart above illustrates a bearish trend that has gripped BBD.B stock since it peaked at $21.85 in August 2000. This relentless bearish trend is easily captured by using the simplest of tools, a downtrend line. This downtrend line is created by connecting the peaks on the price chart. This downtrend line is what separates Bombardier shares from a true bull market.
I believe that the current impulse wave that is now in development will test this downtrend line from below. BBD.B stock has been trading below this downtrend line for almost two decades and, if Bombardier stock is ever going to shine again, it must break above this significant level of price resistance. This level of price resistance currently sits at $3.30 and, based on the price action, I see no reason why this level will not be tested in the near future.
Bottom Line on Bombardier Stock
Bombardier stock has just completed a technical price pattern which is suggesting that another leg higher in the stock has begun. This bullish move is still within the context of a much larger bearish trend.
This bearish trend is now set to be tested; a successful break above the price resistance level will finally be the last piece of the puzzle needed to become truly bullish on BBD.B stock.