DDD Stock: Bullish Setup
3D Systems Corporation (NYSE:DDD) stock had an incredible day on Monday January 9, 2017. The stock ran up 15.70%, and here is the kicker: there was not any company-specific news that was responsible for this surge in price.
Perhaps there is something going on beneath the surface and a few people got wind of it, and the initial advance in the price snowballed into quite an impressive trading day for 3D Systems stock.
This is a scenario in which investors see smoke and assume there is fire. These investors see a substantial rise in the price and they jump in, assuming that something is brewing. I have failed to find an exact reason for this price advance, but what I do know is that I have been looking for a bullish pattern to develop for quite some time, and this price advance is one step forward in that quest.
The reason why I have been looking for a bullish pattern is that 3D Systems stock and other companies with a similar technology were caught in a stock price bubble. These companies saw their stock prices soar to extreme heights before the bubble finally burst.
When a bubble bursts, it is not a pretty sight, and neither are the prices that these companies reach when the bubble is finally unwound. The burst that follows usually ends after the price has lost 90% of its value from its peak. DDD stock experienced this type of fallout, and I have been looking for a bullish trend reversal ever since.
The following 3D Systems stock chart illustrates the aftermath of the bubble.
Chart courtesy of StockCharts.com
It is difficult to refute the bearish trend that is illustrated on the DDD stock chart above.
The downtrend is clear and concise, and it was created by connecting the peaks of the price chart. A downtrend is defined by the price action of lower lows and lower highs that move the price from the upper left to the lower right of the stock chart.
I have been looking for a bottom in DDD stock for quite some time, and the first signal that a trend reversal was occurring was when 3D Systems stock finally broke above this downtrend in September 2016. This event will potentially mark the end of the bear market that completely obliterated the price of DDD stock.
The breakout has not yet begun to develop into anything because DDD stock has yet to follow through on the upside, but the price has come back to test the downtrend line from above. It is not uncommon for a price to trade back and test a previous level of resistance. This price action is referred to as a backtest and, in some circles, traders refer to it as one last kiss goodbye for an old trend line.
The following 3D Systems stock chart illustrates that, although the price has yet to follow through, a potential bullish pattern is now in development.
Chart courtesy of StockCharts.com
The advance of the lows that began in early January 2016, and the trading action that followed after April 2016, are great examples of healthy bullish price action. This healthy price action has me believing that DDD stock can finally make a a move above the April 2016 high. This would constitute a higher high, and this would confirm that a new bullish trend in DDD stock has finally begun.
Healthy price action consists of an impulse wave that advances prices. When the advance in price is complete, a consolidation wave develops that will alleviate any overbought conditions and set up the next advancing impulse wave.
These waves are especially constructive because impulse waves that are separated by a consolidation wave have a tendency to mirror each other in terms of length. A break above the consolidation wave that is currently in development would not only confirm that new bull market has begun, but would also project a bullish price objective of $24.00 on 3D Systems stock.
Bottom Line on 3D Systems Stock
The surge in price has done little to change the overall picture in 3D Systems stock, and I have yet to find out what caused the price to surge. What I do know is that this surge in price managed to get DDD stock one step closer to completing a pattern that will confirm that a new bull market has begun.