The Sky Is Truly the Limit for NetEase Stock

NetEase stockNTES Stock: A Bullish Trend

There are only two views I can take on a particular investment: I can either like it, and therefore I am bullish, or I can dislike it, and I am bearish. I wont beat around the bush when when it comes to NetEase Inc (ADR) (NASDAQ:NTES) stock. I am clearly bullish on this investment, and its performance has failed to disappoint.

Since December 2012, NTES stock has appreciated to the tune of 743.81%, and there is little to indicate that this bullish run toward higher prices is going to end any time soon.

If you’re looking for fundamental data to support the merits of this investment, you have come to the wrong place. My bullish view was generated using technical analysis. This style of investment analysis is based on the notion that historical price and volume data can be used to discern trends and forecast future prices. Therefore, my analysis begins and ends with the NTES stock chart.

I employ the tactic of using multiple times frames to confirm one view. When these time frames are all in alignment, I have more confidence in the patterns that are produced. This data can then be taken and applied to an appropriate trading strategy.

The following weekly chart illustrates the bullish trend, and the indicator that is supporting this bullish advance.

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Chart courtesy of StockCharts.com

There is no denying the bullish trend in NetEase stock, which consists of the quintessential characteristic of higher highs and higher lows. This bullish trend is easily defined by using a simple uptrend line.

This simple uptrend line is created by connecting the troughs on the price chart. This simple uptrend line can be used to define whether NTES stock is trading within a bull market. Trading above the uptrend line is bullish, and trading below it is bearish. This trend line has supported the price since late 2012, and it is difficult to refute its significance.

This uptrend line has been tested on numerous occasions and, each time, buyers have shown up to provide ample price support at this level. If the stock price would ever fall below this uptrend line, I will have all the reason to believe that a large correction was set to ensue, because closing below the trend line suggests that the trend toward higher prices has concluded.

The trend toward higher prices has been supported by the moving average convergence/divergence (MACD) indicator. MACD is a simple and effective trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.

Every time a bullish cross has been generated, it served to indicate that bullish momentum was propelling NetEase stock, and higher prices followed. In February 2017, a new bullish MACD cross was generated, confirming the view that higher prices are now likely to follow.

The following NTES stock chart illustrates the same information, but it uses a daily time scale to illustrate another supportive indicator.

ntes

Chart courtesy of StockCharts.com

The focus on the price chart above is the golden cross highlighted in yellow.

A golden cross is a bullish signal that is produced when the faster 50-day moving average, highlighted in blue, crosses above the slower 200-day moving average, highlighted in red. This signal is popular among traders, and it is used to confirm that a bull market is development.

It is not uncommon for a price to accelerate in the direction suggested by the signal shortly after it is generated. As a result, I have found it wise to tilt my strategies in the direction suggested by this signal.

This bullish indicator was generated in April 2013, and NTES stock has continued to accelerate higher while this indicator remains intact. There were several instances over the years when the moving averages that created the golden cross came close to generating a death cross. A death cross is the exact opposite of a golden cross, and it suggests that bearish repercussions will follow.

In May 2014, November 2015, and May 2016, a death cross was averted, and the golden cross remained intact. It takes a whole lot of buying pressure to avert a bearish signal, and the stock’s ability to do it on multiple occasions is a testament to its inherent strength. The inability to maintain a bearish signal serves to reinforce the notion that a bullish view is still warranted, and that the bullish trend toward higher prices is alive and well.

The following NTES price chart illustrates the recent developments that support the notion of further gains.

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Chart courtesy of StockCharts.com

On February 16, 2017, NetEase stock gapped above the previous all-time high at $270.00, after an upbeat earnings report. This breakaway gap is highlighted on the chart above, and these types of gaps are significant because they rarely get filled, and they indicate that the weakness experienced late last year has finally concluded.

Weeks later, this gap remains open, and this reinforces the bullish signal suggested by this breakaway gap. Indications continue to point to higher prices, and there is little to suggest that this trend will end anytime soon.

Bottom Line on NetEase

I am bullish on NetEase stock because of the numerous indications using multiple time frames that support this view. This bullish view was generated using the NTES stock chart and, until this stock chart suggests that another view is warranted, I will remain bullish.