AXAS Stock: The Technical Price Pattern Is Approaching Completion
The markets are continuing their wild ways, and big swings have become the norm. This is definitely an unnerving market environment, but there is always a bull market somewhere, you just have to be on the lookout for it.
The energy sector has been staging an advance in recent weeks, and I didn’t really think too much of it at first. I just thought I stumbled upon a stealth bull market that was going unnoticed, but the latest news regarding the situation in Syria was a real eye-opener. Tensions in the Middle East are starting to boil over, and it is pushing this sector higher as risk premium is now being priced into the energy sector.
I am focusing on Abraxas Petroleum Corp. (NASDAQ:AXAS) stock because it is an energy play and the sector is currently moving higher. More importantly, I am focusing on Abraxas Petroleum stock because a technical price pattern is approaching completion on the AXAS stock chart and, upon completion, it will imply that much higher stock prices are likely to follow.
The technical price pattern that is approaching completion is highlighted on the following Abraxas Petroleum stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the AXAS stock chart is a cup-and-handle price pattern.
Cup-and-handle patterns, such as this one, are created because a significant level of price resistance prevents the stock price from moving beyond it. This inability to advance beyond a significant price point creates two distinct troughs, where the first trough is much larger than the second. These troughs create the picture that characterizes the cup-and-handle pattern.
The significant level of price resistance responsible for creating the pattern was first established in January 2017, and it currently resides at $2.75. Breaking above this level of price resistance will complete the price pattern and suggest that higher Abraxas Petroleum stock prices are likely to follow.
It just so happens that a very influential momentum indicator, known as the moving average convergence/divergence (MACD) indicator, is currently converging. A bullish signal is likely to be generated in the days ahead, which will support the completion of the cup-and-handle price pattern.
For those who do not know, MACD is a momentum indicator that uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the price action in a stock. This is important information because momentum is a driving force, and in order to sustain a price move in either direction, the applicable momentum is required.
The Abraxas Petroleum stock chart illustrates that after every bullish MACD signal was generated, AXAS stock appreciated as expected, and the same can be said about a bearish MACD signal, where AXAS stock depreciated.
The signal lines that create a MACD signal are currently converging and a bullish MACD cross will imply that Abraxas Petroleum stock is geared toward higher stock prices, which substantially increases the likelihood that the cup-and-handle price pattern is approaching completion.
The ramifications of the cup-and-handle price pattern are magnified when it is combined with price action that preceded the pattern.
The following Abraxas Petroleum stock chart illustrates the wave structure that is created when the cup-and-handle price pattern is combined with the price action that preceded it.
Chart courtesy of StockCharts.com
This AXAS stock illustrates a constructive wave structure that consists of impulse waves and consolidation waves.
The waves highlighted in green are impulse waves, and they define the stage in a bullish trend when a stock makes a sustained move toward higher prices.
The waves highlighted in purple are consolidation waves, and they define the stage in a bullish trend when a stock corrects and refrains from advancing. These waves are very important in the development of a bullish trend because they create the necessary conditions so an advancing impulse wave can follow.
These waves work together, feeding off each other in order to create and sustain a bullish trend.
The cup-and-handle price pattern doubles as a consolidation wave, which means that the completion of this wave will imply that an impulse wave has been initiated.
The impulse waves in development should mirror the magnitude of the impulse wave that preceded it, suggesting that much higher AXAS stock prices are likely to follow once this event begins to unfold.
The completion of a technical price pattern in development on the Abraxas Petroleum stock chart will set a number of events in motion, implying that much higher AXAS stock prices are likely to follow.