FOLD Stock: A Rising Tide Raises All Boats
I just stumbled upon an incredibly constructive-looking chart within a very lucrative sector. I am not going to beat about the bush, the investment that contains this incredibly constructive stock chart is Amicus Therapeutics, Inc. (NASDAQ: FOLD) stock, which also happens to be a biotechnology stock. Amicus stock is up 203.62% year-to-date, and the constructive price action that has characterized these gains suggests that the trend towards higher FOLD stock prices is set to continue.
I have been focusing on biotechnology stocks for a number of months now because this sector is showing signs of strength and is once again leading the market. This is a delightful change following a couple years of underperformance, where the biotech sector lagged behind the broad market indices. This has been an uncommon characteristic because, in bull markets, the biotechnology stocks have been known to outperform by leaps and bounds.
The proxy I use for the biotechnology sector is IBB stock, which is the iShares NASDAQ Biotechnology Index ETF.
There has been a very influential momentum indicator on the IBB stock chart that has been instrumental in suggesting when this investment vehicle is set to appreciate or depreciate. This indicator is highlighted on the following stock chart.
Chart courtesy of StockCharts.com
The focus of this stock chart is the indicator located in the lower panel labeled “MACD.” MACD is an acronym for moving average convergence/divergence, and this indicator is used to distinguish between bullish and bearish momentum influencing the trading action.
Bullish momentum creates a path of least resistance that is geared towards higher stock prices, while bearish momentum creates a path of least resistance that is geared towards lower prices.
The annotations on the IBB stock chart are prime examples of what occurs when a MACD signal is generated.
In December 2011, a bullish MACD signal was generated. This indication suggested that higher prices were on the horizon. While this indication was in bullish alignment, IBB stock appreciated to the tune of 250% before a correction finally ensued.
This correction was confirmed by a bearish MACD signal that was generated in August 2015. This indication correctly suggested that lower prices were likely to prevail. While this indication was engaged in bearish alignment, the biotechnology sector lagged behind the major market indices.
This all changed in May of this year when a bullish MACD signal was generated. This indicator is currently suggesting that the biotechnology stock ETF is set to appreciate once again. This ETF is a proxy for entire sector and therefore, the repercussions are widespread.
A sector-wide move creates a rising tide that raises all boats, and in response, it has created a tailwind that has fueled the advance in FOLD stock
The following Amicus stock chart illustrates the constructive price action that has been supporting and fueling the advance year-to-date.
Chart courtesy of StockCharts.com
This FOLD stock chart is an excellent example of constructive price action. The waves that create constructive price action have been highlighted in order to distinguish between the two.
The waves highlighted in green are impulse waves, and they serve to define the stage in a bullish trend where the stock price advances. The gains created in a bullish trend are created in the impulse waves.
The waves highlighted in purple are consolidation waves, and they serve to define the stage in a bullish trend where the stock price refrains from advancing. Instead, these waves are characterized by corrective price action that unwinds any overbought conditions created in the impulse wave that preceded it. Unwinding an overbought condition creates the necessary environment so a new impulse wave can develop.
In an alternating wave structure, these waves create the necessary building blocks so a bullish trend can sustain itself and flourish. As long as FOLD stock continues to trade in this manner, the bullish trend towards higher stock prices is sustainable.
Amicus stock has just exited the consolidation wave in upward direction, which is suggesting that this wave is complete. Therefore, a new impulse wave is now in development, suggesting that higher stock prices are on the horizon.
The bullish trend in Amicus stock is being supported by constructive price action. This suggests that the bullish trend towards higher prices is still in development. This bullish trend is also being reinforced by a sector-wide move, which is the helping fuel the advance.