MDRX Stock: Breakout Implies Much Higher Stock Prices
It brings me great excitement to outline the developments that have just occurred on the Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) stock chart. The technical price pattern that I first highlighted in a publication in October 2017 is finally complete, and it implies that much higher MDRX stock prices are on the horizon.
Before I begin, let me briefly outline that my views on Allscripts stock have been created using a method of investment analysis called “technical analysis.” Technical analysis is based on the notion that stocks move in trends. Discerning these trends involves analyzing historical data, and, therefore, historical data can be used to forecast what the future may bring.
The completed technical price pattern which implies that much higher Allscripts stock prices are on the horizon is illustrated on the following stock chart:
Chart courtesy of StockCharts.com
This stock chart has been annotated in order to highlight the very large symmetrical triangle that has been in development. Symmetrical triangles are created when the stock price is characterized by a sequence of lower highs and higher lows.
Capturing this pattern was achieved using two converging trend lines. The upper trend line, which represents resistance, was created by connecting the series of lower highs. The lower trend line, representing support, was created by connecting the series of higher lows.
Triangle price patterns are very powerful patterns because the confinement of space caused by the converging trend lines leads energy to build within the pattern. This confinement of space acts like a coiled spring, and the energy stored within the pattern is finally released when the stock price either breaks above resistance or falls below support.
The size and scope of the pattern is directly related to reactions that can be expected once the pattern is resolved. This symmetrical triangle has been in development for 14 years, making it an exceptionally large pattern. That means an exceptionally large reaction can be expected to occur once that pattern is resolved.
The good news I came to share is that this triangle pattern has been resolved. In January 2018, this stock closed above resistance, and this event is highlighted as a breakout on the stock chart above. This breakout is why I have high expectations for MDRX stock in 2018; it implies that much higher stock prices are on the horizon.
My bullish inclination toward higher prices is being supported by the moving average convergence divergence (MACD) indicator, which is located in the lower panel of the Allscripts stock chart.
MACD is a very influential momentum indicator that distinguishes between bullish and bearish momentum. Momentum is required in order to stage a sustained move toward higher or lower prices, and knowing which direction it is geared for is very pertinent information.
A bullish MACD cross was created in July 2017, and it implies that bullish momentum is influencing the trading action in MDRX stock. This means the stock price is geared toward higher prices, because that is the path of least resistance.
The completed triangle pattern and the MACD indicator support the notion of higher stock prices.
Potential Price Objectives
The notion of higher MDRX stock prices is just one step in a process of determining the merits of an investment. The next step is a potential price objective.
Obtaining a potential price objective can be determined by using the wave structure that is highlighted on the following Allscripts stock chart:
Chart courtesy of StockCharts.com
This wave structure consists of impulse waves and consolidation waves, which creates constructive price action. Constructive price action is responsible for creating and sustaining a trend.
The waves highlighted in green are the impulse waves, and they capture the stage in a bullish trend when the stock price makes a sustained move toward higher prices.
The waves highlighted in purple are the consolidation waves, and they capture the stage in a bullish trend when the stock price refrains from advancing. These waves create the necessary conditions for a new impulse wave to develop.
The symmetrical triangle doubles as a consolidation wave, and its completion implies that an impulse wave is now in development. The great thing about this wave structure is that it can be used to create a potential price objective for the impulse wave that is currently in development.
The price objective is created under the premise that consolidation waves act as midpoints. Therefore the impulse wave that is in development should resemble the impulse wave that preceded it.
There are two ways to go about this: a linear price objective or a log-based price objective.
The linear price objective is obtained by taking the length of the impulse in dollars and extrapolating that value from the base of the consolidation wave. The linear method produces a price objective of $34.00.
The log-based price objective is generated in a similar manner, except, instead of using the length in dollars, the length in size is used. This log-based method creates a price objective of $80.00.
Both price objectives are plausible, but, at this current juncture, I will stick with the more conservative approach. If and when MDRX stock hits the $34.00 price point, I will reassess the situation.
I am bullish on Allscripts stock because I have the inclination to believe that higher stock prices are on the horizon. This view was generated by analyzing the company’s stock chart. Until there are indications to suggest otherwise, I will remain bullish on the prospects of MDRX stock.