DDD Stock: An Opportunity Is Approaching
3D Systems Corporation (NYSE:DDD) stock is under pressure following a wicked run to the upside that reinforced the notion that 3D Systems stock had finally put in a long-term bottom and that higher DDD stock prices were to follow.
There is a caveat with this outlook, however, and it requires that the DDD stock price remain above the technical price pattern that was responsible for generating this bullish outlook in the first place. In actuality, if this investment can successfully return and test this pattern from above, it will only reinforce this bullish outlook, solidifying the idea that that a bottom is in place.
If this is indeed the case, the current share price weakness will turn out to be a second chance to pick up this investment before it resumes its predominant move to the upside. We do not get many second chances in our lives, so when one does present itself, it is always wise to act accordingly.
The following 3D Systems stock chart illustrates the price pattern that suggested that a bottom was in place, and that higher prices were likely to follow.
Chart courtesy of StockCharts.com
The price chart illustrates the completion of a symmetrical triangle.
This pattern is characterized by lower highs and higher lows, which are best captured by using two converging trend lines. These trend lines outline the levels of support and resistance that need to be breached in order to suggest that the pattern has been finally resolved.
I am completely enamored with this price pattern because of the reaction that is expected to follow once this pattern is finally resolved. Symmetrical triangles are known for their explosive breakouts, which are a result of the momentum that is built within the pattern as it develops.
The converging trend lines help illustrate that, as this pattern develops, the range between support and resistance begins to contract. This contraction of space causes momentum to build within the pattern that will be released when the pattern is finally resolved.
I have the tendency to describe this pattern as a battle being waged between bullish and bearish investors. As the range begins to shrink, the battle is one step closer to crowning a victor.
On May 8, 2017, the bullish camp was crowned the winner and a spectacular rally quickly ensued in which DDD stock appreciated to the tune of 35% in seven trading days. After this initial run, 3D Systems stock has begun to correct. In order to reaffirm the notion that a new bull market is now in development, which is implied by the symmetrical triangle, the stock price must not fall back below the trend line that initiated this view in the first place.
Currently, that trend line is sitting at $17.00. As time progresses, that trend line slowly begins to drop. Returning to test a previous level of resistance is a common occurrence, and it serves to reinforce that the break above resistance was legitimate, as well as establish it as a new level of price support. I believe that this trend line will ultimately cause the stock to bounce, and I would use this metric to try and snap up a few shares if it ever gets tested.
This level of price support is also being reinforced by another metric and it is illustrated on the following 3D Systems stock chart.
Chart courtesy of StockCharts.com
This is the exact same DDD stock chart, but this time the only metric that is highlighted on the price chart is the 200-day moving average. The 200-day moving average is computed by averaging the closing price over the last 200 days and plotting that value on the price chart. This metric provides a smooth trend line that investment professionals use as a dividing line to determine whether the investment is healthy and in a bullish advance, versus an unhealthy investment in a bearish decline.
In March 2016, DDD stock was finally able to break above this metric. Ever since that date, whenever the stock price has returned to the level from above, the selling has abruptly ended and a rally has quickly ensued. This 200-day moving average is converging with the trend line associated with the symmetrical triangle, which not only serves to suggest that support at this price point is substantial, but very significant too.
This confluence of price support at one price point suggests that a savvy investor can initiate an appropriate trading strategy to acquire shares at this level. Risk is defined by this level because, if the stock price falls below price support, it will be an indication to quickly exit the position.
Bottom Line on 3D Systems Stock
Weakness has taken over the 3D Systems stock price, and a sell-off has gripped this investment. I have the inclination to believe that this price weakness is in the context of a much larger bull market and, as a result, the weakness in DDD stock should be embraced.