SSYS Stock: Higher Prices Are Expected to Follow
I have mentioned in my previous publications surrounding Stratasys, Ltd. (NASDAQ:SSYS) stock that I have been watching for the pieces to fall into place to finally suggest that a bottom has been formed in this 3D-printing stock. SSYS stock is currently trading higher by 8.5% on the day on the heels of an analyst upgrade. This surge in price has done quite a number on the price chart, and it finally suggests that a bottom has been formed in Stratasys stock. A bottom implies that higher stock prices can be expected to follow.
To clarify, my views on Stratasys have been generated using technical analysis. This method of investment analysis is based on the notion that historical price and volume data can be used to discern trends and forecast future stock prices. I have been refining my skill set in this method of analysis for nearly two decades, and I have become proficient in interpreting price action and technical indicators in order to produce an investment view.
I have been looking for a bottom in SSYS shares because there have been numerous indications that have begun to suggest that a bottom was being formed. When a speculative price bubble bursts, the investment in question usually loses 90% of its value before a bottom is finally formed. Stratasys has fulfilled this condition, and I have been searching for further indications that a bottom is in place.
The following SSYS stock chart illustrates the next indication that served to suggest that a bottom was forming.
Chart courtesy of StockCharts.com
The focus of the chart above is the moving average convergence/divergence (MACD) indicator in the lower panel. MACD is a simple, yet effective, trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. This indicator has been instrumental in determining whether SSYS shares were set to advance or decline.
In April 2013, a bullish MACD cross was generated, indicating that bullish momentum was propelling Stratasys stock, and as a result, the path of least resistance was geared towards higher prices. The bullish MACD cross effectively confirmed that a bull market was in development, and that shares were set to advance.
In April 2014, a bearish MACD cross was generated, indicating that bearish momentum was now propelling SSYS stock, and as a result, the path of least resistance was geared towards lower prices. The bearish indicator effectively confirmed that a bear market was in development, and lower prices were set to prevail.
In July 2016, a bullish MACD cross was generated, and this served to indicate that the bulls were once again in control and bullish momentum was once again propelling the share price. This indicator is suggesting that the path of least resistance is now geared towards higher prices, and as a result, I have been looking for indications that SSYS stock has bottomed.
The following Stratasys stock chart illustrates the developments that are now suggesting that a bottom has formed and higher prices are now likely.
Chart courtesy of StockCharts.com
The focus on the price chart above is the downtrend line that formed in early May 2016, after a rally saw SSYS shares double in a few short weeks. After this initial surge, Stratasys shares began to drift lower, where much of the gains that were made were given back.
This bearish drift was easily defined using a simple downtrend line. This downtrend line was created by connecting the peaks on the price chart. This downtrend line had become a significant level of resistance. In order to suggest that a bottom was in place and higher prices were likely, SSYS shares needed to break above this level of resistance. There have been numerous attempts to overcome this trend, but none have been successful until now.
On April 18, 2017, SSYS shares gapped higher on the news of an analyst upgrade. This gap higher caused a “breakout,” as Stratasys stock was finally able to break above the downtrend line. The gap higher reinforces the bullish implications suggested by breaking above the downtrend line. Price gaps that occur at important levels of resistance are breakaway gaps. Breakaway gaps are known to rarely get filled, and almost always signal that a new trend has begun.
This breakout will no doubt cause a golden cross to generate. A golden cross is a bullish signal that is produced when the 50-day moving average, highlighted in blue, crosses above the 200-day moving average, highlighted in red. This signal is used to confirm a bull market is in development.
There have been numerous attempts to generate a golden cross, but all previous attempts, until now, have been thwarted. A golden cross will be the final stamp of approval that will confirm that a bottom has finally been forged and higher SSYS stock prices are likely to follow.
Bottom Line on SSYS Stock
There are numerous indications on the SSYS stock chart that are now suggesting that a bottom in Stratasys stock has finally been put in. This serves to suggest that higher prices are now likely to follow. This bullish view was generated using indications on the SSYS price chart, and I will continue to maintain this view until there are indications that suggest another view is warranted.