WUBA Stock: The Road Is Paved Toward Higher Prices
58.com Inc (ADR) (NYSE:WUBA) is a company that engages in online classified ads, with a business model resembling that of Kijiji.com. 58.com has been a spectacular investment this year; WUBA stock is up almost 171.8% year-to-date.
The reason why I am focusing on 58.com stock now is that I have reason to believe that this exceptional level of performance is set to continue.
As is always the case, my beliefs surrounding this investment are based on my ability to analyze the company’s stock chart. This method is known as technical analysis, and it is predicated on the notion that investments contain embedded price trends and that, therefore, historical data can be used to decipher this trend and forecast what the future may bring.
Indications That Supported the Advance Year-to-Date
The following 58.com stock chart illustrates the predominant trend and the indicator that is currently supporting that trend.
Chart courtesy of StockCharts.com
The bullish trend on the WUBA stock chart contains the quintessential characteristic that defines all bullish trends: a sequence of higher highs and higher lows.
In order to define this trend, an uptrend line was created by connecting the sequence of higher lows. The uptrend line is a simple tool that is currently acting as an impressive level of price support. As long as 58.com stock is trading above this level, I can only assume that the trend towards higher prices is still intact, and that, therefore, higher stock prices shall prevail.
This uptrend line has been supported by a very influential momentum indicator. This indicator is the moving average convergence/divergence (MACD) indicator, which is highlighted in the lower panel of the above stock chart.
The MACD indicator uses the crossing of a signal line in order to distinguish whether bullish or bearish momentum is influencing the trading action in an investment. This is significant information because, in order for a stock to stage a sustained move toward higher stock prices, bullish momentum is required.
In February, a bullish MACD cross was generated, coinciding with the beginning of the uptrend. The bullish momentum suggested by the MACD indicator was instrumental in paving the road toward higher 58.com stock prices.
During this entire move toward higher prices, the MACD indicator has remained in bullish alignment, which is acting along the same lines as the uptrend line. Until a bearish MACD cross is generated, or the WUBA stock falls below the uptrend line, I can only assume that higher prices are still in development.
Indications Suggest That Further Gains Are in Development
The following 58.com stock chart focuses on a number of factors that reinforce the notion that further gains are still in development.
Chart courtesy of StockCharts.com
This second WUBA stock chart focuses on the price action that occurred between August and now.
On August 21, 58.com stock gapped higher on better-than-expected earnings, and that gap in price remains open, yet to be filled. Gaps that occur in the middle of a trend are referred to as continuation gaps, and they are known to mark a midpoint in a trend.
This view that a midpoint has been created is being reinforced by the ascending channel that followed the gap. This pattern contains two parallel upward-sloping lines that act as levels of price support and price resistance. When WUBA stock broke above resistance outlined by this pattern on November 13, it reinforced the notion that the pattern is, in fact, a midpoint consolidation pattern.
Since both of these indications are suggesting that the bullish trend has only reached a midpoint, the presumption is that further gains are yet to come.
With that presumption in mind, these indications can be used to generate a potential price objective for the current move toward higher WUBA stock prices. The continuation gap implies a potential price objective of $84.00 for 58.com stock, while the midpoint consolidation pattern implies a potential price objective of $99.00.
The all-time high that was set in April 2015 stands at $83.71, and both price objectives are suggesting that a new all-time high is set to be forged in the not-too-distant future.
I am bullish on 58.com stock because the indications on the company’s stock chart continue to suggest that the future is bright for this investment. I will maintain my bullish view until the indications that are supporting it suggest that another view on WUBA stock is warranted.