XLRN Stock: Expectations of Grandeur
A trade war is now in full effect, but the major market indices are shrugging it off. This is reminiscent of the trading environment last year, wherein the markets would shrug off any potential bad news.
I see this phenomenon as great news, because 2017 was an exceptional year for stocks. If this market is reminiscent of that trading environment, perhaps we will see a repeat of the exceptional performance that 2017 was so famous for.
If the markets are poised for gains, as I believe they are, companies like Acceleron Pharma Inc (NASDAQ:XLRN) stock are poised to significantly outperform.
The basis of my belief is the completion of an extremely large technical price pattern, which is currently suggesting that XLRN stock is set for an explosive move toward higher prices.
This extremely large technical price pattern is captured on the following Acceleron Pharma stock chart.
Chart courtesy of StockCharts.com
The extremely large technical price pattern highlighted on the above chart is a symmetrical triangle. These patterns are created when the price action is characterized by a series of lower highs and higher lows.
The symmetrical triangle was captured by connecting the peaks and troughs that were created by the price action.
This process creates two converging trend lines, which then create a triangle on the price chart. These trend lines outline where significant levels of price support and resistance reside.
This is important because the implications of this pattern will only come to fruition when XLRN stock either breaks below support or above resistance.
Once one of these events unfold, a powerful move is expected to follow. The reason for this is that the convergence of space between price support and resistance causes energy to build within the pattern as it develops. This stored energy will only be released when the stock exits the pattern.
The size and scope of the pattern is directly related to the move that is likely to follow. For instance, the symmetrical triangle created on the above chart has been in development for five years, making it extremely large, suggesting that an extremely large reaction is expected to follow.
On June 29, Acceleron Pharma stock broke above resistance, completing the symmetrical triangle. This event is currently suggesting that higher stock prices are likely to follow.
This notion of higher XLRN stock prices was already being suggested by the moving average convergence/divergence (MACD) indicator.
MACD is a simple yet effective momentum indicator that distinguishes whether bullish or bearish momentum is influencing the price action in a stock. This is pertinent information because a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it.
For example, for much of the development of the symmetrical triangle, the MACD indicator was in bearish alignment. This suggested that the price action was corrective, and that the path of least resistance was toward lower prices.
This dynamic changed in June 2017, when a bullish MACD cross was generated, suggesting that Acceleron Pharma stock was likely to appreciate—which it did in the days, weeks, and months that followed.
The MACD indicator has remained in bullish alignment, supporting higher prices and the new implications suggested by the completed symmetrical triangle.
The completion of the symmetrical triangle caught many by surprise because it was brought on by a positive news event that caused the stock price to gap higher. This event is captured on the following chart.
Chart courtesy of StockCharts.com
This XLRN stock chart takes a close look at the price action that surrounded the completion of the symmetrical triangle.
On June 29, Acceleron Pharma stock gapped higher to close the day up 42.8%, on the heels of positive results from a phase 3 clinical study.
The gap on the above price chart is labeled a breakaway gap. Those types of gaps rarely get filled, and they almost always suggest that a new trend has begun. The breakaway gap was accompanied by a surge, reinforcing its significance.
The breakaway gap and the surge in volume are both indications that the breakout that completed the symmetrical triangle is legitimate. This leaves the door wide open for a powerful move toward higher prices.
I am bullish on Acceleron Pharma stock because I believe that much higher prices are on the horizon.
My bullish beliefs about XLRN stock are based on the implications of a completed price pattern, which have been reinforced by a number of other technical indications.