ALDR Stock: Coinciding Price Points Are Not a Coincidence
The biotechnology stocks, especially the small-cap ones, have been performing exceptionally well in the current market environment. This is evident in the fact that both the biotech and small-cap indices have gone on to forge new all-time highs in this climate.
I am focusing on Alder Biopharmaceuticals Inc (NASDAQ:ALDR) stock because it is a small-cap biotechnology stock. More importantly, ALDR stock is inches away from breaking out toward higher prices.
This potential event will involve breaking above coinciding levels of price resistance, suggesting that a powerful move toward higher ALDR stock prices is likely to follow.
The first metric currently being tested is highlighted on the following Alder Biopharmaceuticals stock chart.
Chart courtesy of StockCharts.com
This ALDR stock chart illustrates a bearish trend that began after Alder Biopharmaceuticals stock peaked at $54.90 in July 2015.
This bearish trend—a progressing move toward lower prices—is characterized by a series of lower highs and lower lows. That is, of course, the quintessential characteristic of a bearish trend.
A downtrend line was used to capture this bearish trend by connecting the series of lower peaks that resulted from the price action.
This downtrend line is important because it not only captures the pattern, but also identifies where price resistance currently resides. This is important information because, in order to negate the bearish trend, ALDR stock needs to break above the downtrend line, which currently resides at $20.00. Otherwise, lower ALDR stock prices will likely prevail.
Alder Biopharmaceuticals stock is currently testing the downtrend line. Breaking above it would imply that the bearish trend that began in July 2015 has finally run its course. This opens up the door for a bullish trend to follow.
This idea might not seem so far-fetched because the moving average convergence/divergence (MACD) indicator, located in the lower panel, is supporting such an outcome.
MACD is a momentum indicator that uses the crossing of a signal line to determine if bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices. Bearish momentum implies that a stock is geared toward lower prices.
This is very important information because a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it. For example, while the bearish trend was in development, the MACD indicator was in bearish alignment. This supported the notion that the path of least resistance was geared toward lower prices.
This all changed in April 2018, when a bullish MACD cross was generated. It implied that the path of least resistance was now geared toward higher prices, which is why I have to believe that the downtrend line is susceptible to a breakout.
A potential break above the downtrend may actually be on the horizon because this downtrend line shares a level of resistance with a technical price pattern currently developing right beneath it.
The pattern in question is highlighted on the following Alder Biopharmaceuticals stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the ADLR stock chart is an ascending triangle.
An ascending triangle is created when the price action is characterized by a static high and a sequence of higher lows.
This pattern was captured much like the bearish trend was; by connecting the peaks and troughs created by the price action that characterized this pattern. The end result is two converging trend lines that form this ascending triangle.
The upper trend line identifies where price resistance resides. The lower trend line identifies where price support resides. Resistance outlined by this pattern currently resides at $19.00 and it is converging with the level of price resistance outlined by the downtrend line.
What this suggests is that if Alder Biopharmaceuticals stock can break above these converging/coinciding levels of resistance, this event will not only negate the bearish implications of the downtrend line, but it will also complete the ascending triangle. This would suggest that much higher ALDR stock prices are likely to follow.
Since I happen to believe that coinciding price points are not a coincidence, I will be watching with great anticipation because I believe a breakout is a real possible outcome.
I am watching the price action on the Alder Biopharmaceuticals stock chart because I believe that if ALDR stock can close above $20.00, it will negate its bearish trend, while simultaneously suggesting that much higher prices are likely to follow.