AET Stock: Ready, Set, Go
Aetna Inc (NYSE:AET) stock is gorgeous. Yes, this is a strange way to describe a potential investment but, in my world, such a compliment isn’t difficult to justify. I have looked Aetna stock up and down, and I have reason to believe that higher AET stock prices are likely to follow.
To clarify to anyone who has not had the pleasure of reading my previous publications, I base my opinions on a potential investment using technical analysis. This method of investment analysis is based on the notion that historical price and volume data can be used to discern trends and forecast future prices. As a result, I spend much of my time analyzing price patterns and indicators that have been generated on a company’s price chart.
When I refer to Aetna stock as “gorgeous,” I am referring to the company’s price chart—and the indications that I have been able to pull from it—to generate my view. I will admit that, perhaps my views are generated by using a shallow style of investment analysis that is not as deep as fundamental analysis.
I have been schooled in fundamental analysis, and I respect this method of investment analysis but, when it comes to gauging the next direction that a price is going to take, this method does really little. Technical analysis, on the other hand, provides the edge I am looking for.
The following price chart illustrates the beautiful indications on the Aetna price chart which are suggesting that higher prices are likely to follow.
Chart courtesy of StockCharts.com
It is difficult to refute that there is a bullish trend on the price chart above. It contains the quintessential characteristic of a bullish trend: higher highs and higher lows. This creates the price chart we’re all too familiar with, the one that begins in the lower left and ends in the upper right.
This gorgeous bullish trend is easily defined by using a simple uptrend line. An uptrend line is created by connecting the troughs on the price chart. Using this trend line as a tool is as easy as it was to create. As long as AET stock remains above this uptrend line, I can only assume that higher prices will prevail, because this serves to suggests that the bullish trend is still intact.
If the stock price should ever trade below this trend line, it would indicate that the bullish trend has concluded, and a larger sell-off would be expected to follow. This trend line has been tested on numerous occasions and, on each occasion, buyers have stepped in to support this trend line that is now also a level of support.
At this current juncture, I am not worried about lower prices because the moving average convergence/divergence (MACD) indicator is supporting the notion of higher stock prices. MACD is a simple yet effective trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. This indicator has had a great track record of confirming the direction that Aetna shares are heading in
In December 2013, a bullish cross was generated, implying that bullish momentum was influencing AET shares. As a result, the path of least resistance was geared toward higher prices. This indicator did not fail to impress, because the share price proceeded to appreciate by 133% before a bearish cross was generated.
This aforementioned bearish cross was generated in November 2015, implying that bearish momentum was influencing Aetna shares. As result, the path of least resistance was geared toward lower prices. Once again, this indicator correctly confirmed the notion that higher prices were out of the question, as a correction in price was playing out.
A bullish cross was just generated in April 2017, and the same bullish implications that propelled Aetna shares in the previous bullish MACD cross are now expected to follow. AET shares are now geared toward higher prices, and the price action is perfectly aligned for such a development.
The following Aetna stock chart illustrates the constructive price action that is reinforcing the view that higher prices are likely to follow.
Chart courtesy of StockCharts.com
The price chart above is using the same scale as the previous chart, but the focus has turned toward the constructive price action that is occurring above the trend line.
Constructive price action consists of a two-wave structure, which contains an impulse wave and a consolidation wave. The function of an impulse wave is to advance the price of the stock in an accelerated state, while the function of the consolidation wave is to alleviate any overbought conditions that were created during the advance and, more importantly, to set up the next advancing impulse wave.
These waves essentially feed off each other, and they create the necessary building blocks of a sustainable trend.
In November 2016, AET stock exited the consolidation wave in an upward direction, suggesting that a new advancing impulse wave was set to develop. This suggestion is now being reinforced by the bullish MACD cross that has just been generated. Aetna shares are also on the cusp of creating a new all-time high, which will add fuel to the bullish view when it is achieved.
Aside from suggesting the next direction in the price, the theory surrounding constructive price action can also be used to generate a potential price objective for the impulse wave that is now in development.
The theory states that impulse waves that are separated by a consolidation wave tend to mirror each other in terms of length. Applying this theory to the wave structure in the above chart creates the potential price objective of $190.00.
Bottom Line on Aetna Stock
Aetna stock is now in perfect alignment for an accelerated run toward higher prices. This bullish view is being supported by a multitude of technical indicators. I will remain bullish on Aetna stock for as long as these indications continue to support the view that higher AET stock prices are likely.