DDD Stock: A Compilation of Bullish Signals
It’s official: the current bull market that began in the aftermath of the financial crisis in early 2009 is now the longest bull market in history. This is something that needs to be applauded because it is quite an exceptional feat.
The previous bull markets that lasted anywhere as long as the current one all ended in tears as violent and abrupt bear markets unfolded. Perhaps one day, when this bull market has run its course, a similar outcome can be expected, but I do not think that such a scenario is on the near horizon.
The reason is that the current move toward higher index values has been broad-based, and there has not been any deterioration in market breadth to suggest that the trend toward higher prices is starting to fade.
This sustained move toward higher index values is why I am focusing on 3D Systems Corporation (NYSE:DDD). I believe that 3D Systems stock is poised to make a move toward higher prices.
My beliefs are all centered around a number of technical indications that are now suggesting that a move toward higher DDD stock prices is highly probable.
The following chart illustrates a number of indications that have created a bullish backdrop, supporting the notion that the stock is geared toward higher prices.
Chart courtesy of StockCharts.com
This DDD price chart captures a bearish trend that began in January 2014, after 3D Systems stock peaked at $97.28.
This bearish trend was responsible for decimating the company’s share price. And when everything was said and done, 93.8% of the company’s value was lost before the stock was finally able to find its footing.
The entire time the stock price was dropping, the moving average convergence/divergence (MACD) indicator was in bearish alignment.
MACD is a trend-following momentum indicator that uses the crossing of a signal line in order to determine whether bullish or bearish momentum is influencing the price action in a stock.
Bullish momentum implies that a stock is likely to appreciate, while bearish momentum implies that a stock is likely to depreciate.
Momentum is such an influential force that a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it. This is why the MACD indicator is very effective at determining the predominant trend that is in development.
For example, in April 2014, a bearish cross was generated, indicating that bearish momentum was influencing the price action in DDD stock, creating a path of least resistance toward lower prices. This is why the entire time this indicator was in bearish alignment, the stock suffered mounting losses.
This came to an abrupt end in April 2016, when a bullish MACD cross was finally generated, indicating that bearish headwinds had finally subsided and that, therefore, the DDD share price was finally ready to stage an advance.
The MACD indicator has remained in bullish alignment since that date. It even managed to avert a bearish MACD signal earlier this year. Averted signals are powerful indications suggesting that a stock is poised to make an advance.
That’s why it wasn’t a complete coincidence that the DDD price began to accelerate higher once this the bearish signal was averted.
In August 2018, 3D Systems stock broke out above the downtrend line, which was acting as a level of price resistance.
This event and the price action that followed is captured on the following chart.
Chart courtesy of StockCharts.com
This DDD stock price chart illustrates that on August 8, the stock gapped higher by almost 32.4% on the day, on the heels of better-than-expected second-quarter earnings results.
This gap in price is very significant because the stock price gapped right through the downtrend line, negating all the bearish implications suggested by that line. I labeled this price gap a breakaway gap because breakaway gaps rarely get filled and almost always indicate that a new trend has begun.
Soon after this price gap, a technical price pattern known as a pennant formed. Pennants are continuation patterns, and they are identified by their unique shape depicting a small triangle. In short order, this technical price pattern was resolved in a bullish manner, which simply suggests that the trend toward higher prices is set to continue.
The breakaway gap and the pennant are reinforcing the implication suggested by the broken downtrend line and the bullish MACD signal. This compilation of indicators is why I believe that 3D Systems shares are geared toward much higher stock prices.
A compilation of technical indications is suggesting that 3D Systems stock is now geared toward higher prices.
As a result, I will maintain a bullish view on DDD stock until there indications to suggest that a bullish view is no longer warranted.