Nintendo Stock Chart Is Favoring the Bulls

Nintendo-StockNTDOY Stock Is Building a Bullish Foundation

Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) is making headway once again in the gaming world, and it is time to take notice.

Last summer, the company made quite a splash with its Pokémon Go mobile game app that caused Nintendo stock to surge in price overnight, as the enthusiasm for this product went viral.

The popularity of this game was so widespread that media outlets were awash with stories surrounding the enthusiasm, and the dangers of playing this mobile game in public places.

Further, Nintendo’s rehash of its 1985 game console, the “NES Classic Edition,” was sold out almost immediately this past Christmas season, and anyone who wanted to get their hands on one had to pay a pretty premium.

Nintendo is now getting ready to release its new console, the “Nintendo Switch,” in March of this year and, if the popularity of the previous products are any example of the type of fanfare that Nintendo is carrying, then perhaps this console is the catalyst that sends Nintendo stock prices soaring once again.

I have reason to believe that such a phenomenon could play out because the price action on the NTDOY stock chart is becoming very constructive, indicative of an upcoming event that will drive the price of the stock higher.

The following stock chart illustrates the price action that centered around the Pokémon Go release.

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Chart courtesy of StockCharts.com

The Nintendo stock chart above illustrates that the $24.00 level is a key level to be watched. In 2015, this level was tested numerous times, and it proved to be an area of strong resistance, as sellers were willing to step in and provide ample supply that eventually overwhelmed buyers.

It was not until July 8, 2016, after the release of the Pokémon Go mobile game app, that Nintendo share prices were able to gap above of this key level of resistance. It took a tremendous amount of buying pressure to accomplish this feat, and this is illustrated by the massive volume spike that accompanied the gap in the price.

This gap in the price has served to fulfill its obligation as a breakaway gap. Breakaway gaps rarely get filled and almost always signal that a new trend has begun.

In the majority of cases, when an important level of resistance is finally broken, it becomes an important level of support. Ever since Nintendo stock prices broke above resistance, it has continued to find support at this key level.

This key level of support is reinforced by a mathematical tool that is favored by many traders, and it is illustrated on the following NTDOY stock chart.

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Chart courtesy of StockCharts.com

The NTDOY stock chart above illustrates the Fibonacci retracement numbers. Traders use this tool to identify counter-trend price objectives. The theory behind these numbers is that, once a primary advance is complete, a pullback will occur that retraces approximately 50%–62% of that primary advance. Once this pullback is complete, the predominant trend can reassert itself.

This tool has become so popular among traders that they refer to this retracement as “trading into the box.” Many trading strategies are centered around this range. The 62% retracement level coincides with support outlined on the Nintendo stock chart provided above, and it reinforces the notion that $24.00 is a serious level of price support.

As long as the stock price remains above this level, it is presumed that bullish developments will follow, and the predominant trend toward higher prices will continue. Trading below this level indicates that the bears have once again taken control of NTDOY stock and that, unfortunately, lower prices will prevail.

The following stock chart illustrates the constructive price action that is developing above this key level of support. This price action is beginning to suggest that higher prices are a likely event.

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Chart courtesy of StockCharts.com

The price action that has developed above the key level of support is very constructive. This constructive price action can be interpreted to assume that a bullish event will surface that will propel Nintendo share prices higher.

This constructive price action consists of a wave structure that is instrumental in developing and sustaining trends. The structure consists of impulse waves that advance the price, and consolidation waves that unwind overbought conditions and set up the next impulse wave.

The impulse wave is highlighted in green in the above chart, and the consolidation wave that is currently in development above the key level of support is highlighted in purple.

The consolidation wave is taking on the shape of a triangle. Triangles are particularly explosive patterns because, as the pattern progresses, the walls of confinement outlined by support and resistance begin to contract. This contraction causes momentum to build within the pattern that is released when the price exits that pattern.

The wave structure has a secondary benefit, other than discerning trends. Impulse waves that are separated by a consolidation wave have a tendency to mirror each other in terms of length. This tendency can be used to create a potential price objective. Applying this notion creates a bullish price objective of  $45.00.

The moving average convergence/divergence (MACD) indicator, in the lower panel of the chart above, is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish momentum. The MACD signal lines are converging and a bullish cross can occur at the same time the consolidation pattern is completing. This confluence of indicators would support the notion of higher Nintendo stock prices.

This entire bullish view is contingent on NTDOY stock staying above $24.00.

Bottom Line on Nintendo Shares

The price action on Nintendo’s stock chart continues to suggest that higher NTDOY share prices are likely. This bullish view is contingent on the notion that the stock remains above the key level of support at $24.00.