AJRD Stock Is Geared for Higher Stock Prices
The prospects of a trade war are scary, even though the market indices continue to dismiss its implications. My fears lie in the fact that this tit-for-tat affair has “war” in its title. History has shown us that trade wars have led to actual wars, which is a scary proposition.
This theme of war is why I am now focusing on the defense contractor Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). I have chosen Aerojet Rocketdyne stock because it is flirting with its all-time high, and I happen to believe that the stock will push through this level of price resistance. As a result, higher prices will follow.
These beliefs are based on a number of technical indications that continue to suggest that AJRD stock is geared for higher prices. For instance, the stock has been in a bullish trend since the conclusion of the financial crisis.
This bullish trend is captured on the following chart.
Chart courtesy of StockCharts.com
The above stock chart illustrates price action consisting of a series of higher highs and higher lows. Higher highs and higher lows are the quintessential characteristics of a bullish trend. They create the stair-step price action that bullish trends are famous for.
The bullish trend was captured by using an uptrend line, which was produced by connecting the troughs created by the series of higher lows. This uptrend line not only captures the bullish trend, but also pinpoints where price support resides.
Pinpointing where price support resides is very pertinent information. As long as AJRD stock is trading above the uptrend line, I can only assume that this magnificent bullish trend—which has supported Aerojet Rocketdyne stock since 2009—is intact and remains in development. Of course, this augurs further gains.
This notion that higher prices are on the horizon is being reaffirmed by the constructive price action occurring above the uptrend line.
This constructive price action is captured on the following stock chart.
Chart courtesy of StockCharts.com
This stock chart captures constructive price action consisting of a wave structure containing impulse waves and consolidation waves.
The waves highlighted in green on the above chart are impulse waves. These waves capture the stage in a bullish trend when a stock sustains a move toward higher prices. The waves highlighted in purple are consolidation waves. These waves capture the stage in a bullish trend when a stock price corrects and refrains from advancing.
These waves feed off each other, creating the stair-step price action responsible for sustaining a bullish trend.
The development of these waves has been confirmed 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.
This is why the development of every impulse wave was accompanied by a bullish MACD cross, and the development of every consolidation wave was accompanied by a bearish MACD cross.
A bullish MACD signal was generated in May 2018. It correctly suggested that the consolidation wave was coming to an end and that an impulse wave was likely to follow.
In July, the consolidation wave was completed when AJRD stock surged higher by 21.6% on better-than-expected second-quarter earnings. This event confirmed that an impulse wave was now in development.
Each developing impulse wave took out the highs that preceded it. I do not believe that this time will be any different, which is why I also believe that the stock is poised to take out the previous all-time high at $35.50. Further gains will likely follow.
I am bullish on Aerojet Rocketdyne stock because the technicals continue to support the notion that it is still in a developing bullish trend.
I am going to maintain a bullish view on AJRD stock until there are technical indications suggesting that my bullish view is no longer warranted.