Technical Analysis: Allscripts Stock Is Setting the Stage for an Explosive Move

Allscripts stocks
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MDRX Stock: An Explosive Technical Price Pattern Is in Development

If you hadn’t noticed, the healthcare stock sector began to make a move towards higher stock prices in mid-summer, and this move continues to gain traction as more and more names within this space are joining in on this rally. Under this pretense, I am focusing on Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) stock, because this healthcare stock has been lagging for years, but I have the inclination to believe that an explosive move in MDRX stock is in the making.

My attention towards this healthcare stock was piqued because there is a very large technical price pattern currently in development on the Allscripts stock chart. This pattern is known for especially explosive breakouts, and the broad-based move occurring within this sector is creating a tailwind that increases the odds that this pattern will resolve itself in a bullish manner.

Using a company’s stock chart to generate a view on it is known as technical analysis. I have been indulging myself with this body of knowledge for nearly two decades for one simple reason: when this method of investment analysis is applied correctly, the results are outstanding.

The following Allscripts stock chart illustrates the large technical price pattern that is currently in development.

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Allscripts stock chart

Chart courtesy of StockCharts.com

This MDRX stock chart illustrates a symmetrical triangle that has been in development for the better part of 14 years, translating into a very large pattern.

Triangle patterns are created by the price action on the stock chart that contains a series of lower highs and higher lows. This pattern is identified using two converging trend lines, which are created by connecting the series of lower highs, followed by connecting the series of higher lows.

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The trend lines that define this pattern represent levels of price support and price resistance. Breaking above resistance or breaking below support completes this pattern, and an explosive result is expected to follow.

The power generated by this pattern is a result of momentum being stored within the pattern as it develops. The confinement of space caused by the converging levels of price support and price resistance acts like a coiled spring, and when a respective level of support or resistance is breached, the built-up momentum is released.

The size and scope of the explosive reaction that is expected to follow is directly related to the size of the pattern that is in development. The symmetrical triangle on the MDRX stock chart is exceptionally large, and therefore an exceptionally large reaction is expected to follow once that pattern is resolved.

I have the inclination to believe that this pattern will resolve itself in a bullish manner by closing above $16.00. The short-term trend currently favors higher MDRX stock prices, and the broad-based move in the healthcare sector is acting like a rising tide, which raises all boats.

The following Allscripts stock chart illustrates the short-term bullish trend that is currently in development inside the symmetrical triangle.

MDRX price chart

Chart courtesy of StockCharts.com

This MDRX stock chart illustrates a bullish trend in development.

This trend, which has advanced the stock price since the share price bottomed in November 2016, is very uniform. This uniform trend is captured using an ascending channel. This channel was created using two upward-sloping trend lines that represent levels of price support and price resistance. Using this channel is quite simple; as long as Allscripts stock is oscillating within this channel, I can only assume that higher stock prices are on the horizon.

This bullish view is being supported by an indication that was created in May 2017, when the faster 50-day moving average crossed over the slower 200-day moving average. This indication is called a golden cross, and it is used by the trading community to indicate that a bull market is in development.

The moving averages that created the golden cross are expanding, which not only suggests that a bull market is still in development, but that it is gaining strength.

The oscillation of Allscripts stock within this ascending channel, combined with the golden cross, increases the odds that resistance outlined by the symmetrical triangle will be tested and possibly broken.

Analyst Take: 

A very large technical price pattern is in development on the Allscripts stock chart. Given the market environment and the broad-based move in healthcare stocks, I have the inclination to believe that this pattern will resolve itself in a bullish manner. A bullish resolution of the technical pattern would imply that much higher MDRX stock prices are on the horizon.