AJRD Stock: A Move Toward Higher Stock Prices Is on the Horizon
I have spoken to a lot of traders, and they much preferred the trading action that characterized the markets all of last year. The current market environment has them second-guessing their positions almost instantly because the markets are plagued with high volatility and wild point swings.
This turbulent trading environment makes it increasingly difficult to get a gauge on which direction the stock market is going to move on any given day. However, this doesn’t mean there aren’t any compelling stocks that are setting up to move toward higher prices.
In my search for a compelling stock, I have stumbled upon aerospace and defense company Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). I am focusing on this stock because a number of indications are currently suggesting that a move toward higher prices is on the horizon.
The first indication suggesting that a move toward higher prices is likely is a completed technical price pattern, which is highlighted on the following Aerojet Rocketdyne stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the above stock chart is a descending channel, characterized by an orderly series of lows and highs that are both on a decline.
Identifying these patterns is accomplished by connecting the lower lows and lower highs. This method creates two parallel downward-sloping trend lines that capture the descending channel by identifying key levels of price support and resistance.
Descending channels are bearish patterns and, as long as a stock price is contained within the channel, lower prices will prevail. Only when the stock exits the pattern by breaking above price resistance or falling below price support is the pattern finally resolved, with the stock price then expected to continue in that direction.
On April 12, the descending channel was finally resolved when Aerojet Rocketdyne stock broke above the trend line that represented price resistance This breakout implies that the bearish trend has run its course and that higher AJRD stock prices are ahead.
The repercussion suggested by the completed descending channel is magnified when it is combined with the price action that preceded it.
The following stock chart combines the completed descending channel with the price action that preceded it, creating a constructive wave structure.
Chart courtesy of StockCharts.com
A constructive wave structure contains impulse waves (green) and consolidation waves (purple), which are responsible for creating and sustaining a bullish trend.
The former show where in a bullish trend a stock begins moving toward higher prices, while the latter detail where in the trend a stock corrects and refrains from advancing.
Consolidation waves are very important because they create the foundation that is necessary to support the development of an impulse wave.
The descending channel doubles as a consolidation wave, and its completion is suggesting that a new impulse wave is now in development. This is supported by the moving average convergence/divergence (MACD) indicator.
MACD is an influential trend-following momentum indicator that uses the crossing of a signal line to distinguish whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices, while bearish momentum implies the opposite.
Every impulse wave has been accompanied by a bullish MACD cross, and every consolidation wave has been accompanied by a bearish MACD cross.
The MACD signal lines are converging and a bullish MACD cross is likely to be generated, confirming the notion that higher AJRD stock prices are in development via an impulse wave.
I am bullish on Aerojet Rocketdyne Holdings Inc because a number of technical indications are currently suggesting that higher AJRD stock prices are the path of least resistance. Therefore, a bullish view is warranted.