FFIV Stock: Big Picture Potential
F5 Networks, Inc. (NASDAQ:FFIV) is a company that develops and produces application delivery systems that speed up and efficiently deliver cloud computing solutions. Cloud computing has become an instrumental growth producer, and many companies now use this segment of the technology to pad their bottom lines. FFIV stock has been trading sideways since shares peaked in 2011, but that may soon be coming to an end.
I use the stock price chart as my main tool to help me decide how I am going to capitalize on a potential investment. This style of analysis is known as technical analysis, and it is based on price and volume. These factors can be used to discern trends and forecast future prices.
The reason I like F5 Networks stock is that the long-term chart paints a compelling picture, and the size of this picture is what has me really drawn to FFIV stock.
The following F5 Networks stock chart illustrates the pattern that I find compelling.
Chart courtesy of StockCharts.com
The price structure of the FFIV stock chart above can only be described as bullish. This bias is based on an impulse wave that developed off of the bottom that was created after the financial crisis, and the consolidation wave that followed it. Bullish wave price actions are characterized by impulse waves and consolidation waves that follow each other. It is this reason that trends look like staircase patterns.
The size of the consolidation wave is what drew me to FFIV stock in the first place. Larger patterns are more significant, and this consolidation wave is 5.5 years in the making. This consolidation wave has the price oscillating within a large trading range and, while this oscillation continues, momentum is being stored within the pattern. The price will eventually gather enough momentum that it will lead to a breakout. Longer and larger patterns translate into an equally large and lengthy reaction.
If this pattern breaks out, a price target can be obtained by using the prevailing impulse wave. Impulse waves coming into a consolidation wave tend to mirror the prevailing impulse wave. As a result, a price objective can be obtained using this premise. When FFIV stock closes above $140 on a weekly basis, the target price of this breakout is approximately $190.
The lower panel labeled “MACD” opens up the possibility that a breakout can happen in the near future. The moving average convergence/divergence (MACD) is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. In July 2016, MACD generated a bullish cross that confirmed that the bulls are now in control of FFIV stock. This increases the chance that a bullish trend can develop to break out of the range.
The short-term F5 Networks stock chart is also bullish and is illustrated below.
Chart courtesy of StockCharts.com
In June, F5 Networks stock generated a golden cross. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). Traders use this signal to confirm that a bull market is on the horizon. This signal is similar to the MACD signal, and both signals were generated around the same time. It is not a coincidence that FFIV stock accelerated its trend higher after these signals were generated.
On October 27, 2016, F5 Networks stock broke out of its consolidation wave that had resistance at $125. Earnings were the catalyst for this breakout, and this increases the odds that the larger trading range will be tested and possibly broken.
The long-term and short-term charts are both bullish. Multiple time frames that conclude the same premise have often provided good signals.
The Bottom Line on F5 Networks Stock
I am watching F5 Networks stock as it approaches the the top of its trading range. A successful breakout would require a close above $140 on a weekly basis. This price action would make me bullish on FFIV stock, as it will open the door to much higher prices.