DDD Stock: The Backtest Is Now Complete
I became bullish on 3D Systems Corporation (NYSE:DDD) stock on May 8, 2017, when it completed a technical price pattern that confirmed that a bottom had finally been put in, and therefore, a new bull market was in development. After this pattern was completed, 3D Systems stock went on to appreciate by 35% before a correction ensued.
I am focusing on this investment because this correction in the stock price has returned to test a number of important metrics. My bullish view on DDD stock is predicated on its ability to remain above these metrics.
I outlined these metrics in a previous report titled “Weakness in 3D Systems Stock Should Be Embraced,” stating that when DDD stock tests these metrics, it will serve as a second opportunity to jump on board this newly minted bull market. That time is now, but there is a caveat, of course: 3D Systems stock must remain above these metrics in order to maintain its current bullish stance. From a risk/rewards standpoint, applying an investment strategy at this level would not be a very difficult task to accomplish.
The following 3D Systems stock chart illustrates the first metric that was just tested from above.
Chart courtesy of StockCharts.com
This price chart illustrates a symmetrical triangle. Since the summer of last year, I have been waiting for the completion of this pattern to confirm that a new bull market was in development.
A symmetrical triangle is characterized by a series of lower highs and higher lows, which is defined using two converging trend lines. These trend lines outline the respective levels of support and resistance that need to be breached in order to suggest that the pattern has been finally resolved.
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Symmetrical triangles are very special price patterns that are known for their explosive breakouts. On May 8, 2017, this pattern was resolved when the stock price exited it in an upwards direction and an explosive rally quickly followed. DDD stock appreciated to the tune of 35% in the span of seven trading days.
This was exactly the explosive move I anticipated. The sharp correction, on the other hand, caught me a bit off guard. But once it was in development, I knew that this explosive breakout was going to be tested from above.
Testing a previous level of price resistance from above is refereed to as a “backtest,” and it serves to reaffirm that the breakout was legitimate. It also serves to establish a new level of price support. What this means is that this newly minted bull market is predicated on DDD stock’s ability to remain above this important price point.
On July 27, the symmetrical triangle was tested from above when the 3D Systems stock price hit an intra-day low of $16.29, and closed the day at $16.93. I had stated in the previous publication that I strongly believe that this significant level will hold and that a bounce will quickly follow. My beliefs are centered around the second metric that is serving as a second layer of price support that currently coincides at this exact level.
The following 3D Systems stock chart illustrates the second metric that is providing price support at the same level as the symmetrical triangle price pattern.
Chart courtesy of StockCharts.com
This DDD stock chart highlights the 200-day moving average. The 200-day moving average, which is computed by simply averaging the closing price over the last 200 days and plotting that value on the price chart, is used as a dividing line that separates healthy bullish investments from unhealthy bearish ones.
It was in March 2016 that DDD stock was finally able to breach this metric, suggesting that the investment was once again healthy and bullish. Ever since that glorious date, the 200-day moving average has been acting as a level of price support in which buyers continue to step in when this metric is tested from above. This level currently sits at $16.52, and it was tested on July 27, on an intra-day basis, when the 3D Systems stock price hit a low of $16.29 and closed the day at $16.93.
If a bull market in DDD shares is actually in development, then the stock price must stage a rally off these converging metrics. I have the inclination to believe that one will occur, but only time will actually tell.
Bottom Line on 3D Systems Stock
I have been waiting for 3D Systems stock to return and test two converging metrics. These metrics are now being tested, and if a bull market in DDD stock is actually in development, then 3D Systems shares should stage a rally from this point.