Verisign Stock Is Moments Away from Liftoff

VRSN stockVRSN Stock Is Completing a Consolidation Pattern

I recently stumbled upon Verisign, Inc. (NASDAQ:VRSN) stock, and I am excited to report on my findings. When it comes to a particular investment, I am either bullish or bearish on its forward prospects, and it didn’t take me long to come to the conclusion that I am bullish on Verisign stock.

VRSN stock is a great example of an investment that can be deciphered using a price chart, and I was able to support my bullish views by using multiple time frames.

Using a price chart as the basis of an investment view is known as technical analysis. This method is based on the notion that historical price and volume data can be used as a tool to decipher a trend and forecast future prices. I have been using this method to formulate trading strategies for nearly two decades, and I could not have done it any other way.

The following long-term Verisign Stock chart illustrates the trend that has supported the bullish advance.

The quintessential characteristic of a bullish trend is when the price of a stock makes higher highs followed by higher lows. This dynamic causes the price to move from the lower left to the upper right of the price chart. The bullish trend is captured by using a simple uptrend line, and it is highlighted on the VRSN stock chart above.

vrsn stock chart

Chart courtesy of StockCharts.com

This simple uptrend line is created by connecting the troughs on the price chart, which form the successive series of higher lows that has developed. This simple trend line effectively identifies the bullish trend and, as long as Verisign shares continue to trade above this trend line, it is safe to assume that higher prices will prevail.

This trend line had been tested on numerous occasions, and VRSN has never traded below it. This trend line began in 2002, and it is difficult to refute the importance of a trend line that has been in development for 14 years. If VRSN ever closes below this trend line, I will have all the reason to believe that the bullish trend has run its course and lower prices are set to prevail.

The following medium-term Verisign stock chart illustrates the constructive price action that has been developing above the uptrend line.

verisign stock chart

Chart courtesy of StockCharts.com

The price action above the uptrend line can be best described as bullish constructive price action.

Bullish constructive price action consists of impulse waves that serve to advance the price, followed by consolidation waves that serve to unwind overbought conditions and set up the next advancing impulse wave. The impulse wave is highlighted in green in the above chart, and the consolidation wave is highlighted in purple.

I tend to focus a lot of my time on consolidation waves because the resolution of this pattern will dictate the next direction that the price will take. I specifically look for consolidation waves when scanning for a potential investment.

This consolidation wave comes in the form of a triangle, and these price patterns are particularly explosive. Triangles are created by using two converging trend lines and, as the pattern progresses, the range that the price can travel begins to contract. This confinement of space causes momentum to build within the pattern. This built-up momentum is finally released when the price exits the pattern, and creates the necessary force to create an impulse wave.

The consolidation waves not only identifies the next direction in the price, but it can also be used to generate a potential price objective. This price objective can be obtained by basing it on the notion that the consolidation wave acts as a midpoint and, therefore, the developing impulse wave will mirror the impulse wave that preceded the consolidation wave.

Focusing my attention on the first chart, I can see that the impulse wave began to develop in 2009, in the aftermath of the financial crisis. If I apply the length of this impulse wave to the current consolidation pattern, it creates a potential price objective of $150.00. This price objective is contingent on the price exiting the consolidation pattern in an upward direction.

The following Verisign stock chart illustrates the indications that are currently supporting the short-term advance that is currently testing resistance outlined by the consolidation triangle.

VRSN stock chart

Chart courtesy of StockCharts.com

The current advance within the consolidation triangle has been supported by an uptrend line. This trend line defines the short-term bullish trend in VRSN stock and, as long as the price remains above this trend line, it increases the odds that the consolidation pattern will resolve itself by exiting the pattern in an upward direction. This feat would indicate that another impulse wave is set to develop, and that higher prices are set to prevail.

A golden cross was generated in early March 2017, and this indicator reinforces the view that the consolidation wave will be resolved in a bullish manner. 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). Traders use this indicator to confirm that a bullish trend is in development, and it is not uncommon for a price to accelerate after this indicator is generated.

Bottom Line on Verisign Stock

I am bullish on Verisign stock because there are indications on multiple time frames that suggest that this view is warranted. A bullish resolution to the current consolidation pattern, which is currently in development, will open the door to much higher VRSN stock prices. My bullish view is contingent on technical indicators so, as a result, I will continue to hold a bullish view until there are indications that a different view is warranted.