AMPE Stock: Waiting for the Applicable Signals
I have been focusing on a number of small-cap biotechnology stocks in recent weeks. The reason I have been doing so is that the stocks in this sector have either been moving toward higher prices or are setting up to do so.
I am focusing on Ampio Pharmaceuticals Inc (NYSEAMERICAN:AMPE) stock because it is on the cusp of generating coinciding signals that would imply that AMPE stock is embarking on its next leg toward higher prices.
The first signal entails completing the technical price pattern that is highlighted on the following Ampio Pharmaceuticals stock chart.
Chart courtesy of StockCharts.com
The technical price pattern captured on the above chart is a descending channel.
A descending channel is characterized by price action that contains a series of lower lows and lower highs. This is the quintessential characteristic that defines a bearish trend.
What makes this bearish trend special is that, when I connect the peaks and troughs created by the price action, it creates two parallel downward-sloping trend lines.
These two trend lines capture the price pattern by identifying where levels of price resistance and price support reside.
This is important information because, in order to negate the implications suggested by the bearish trend, Ampio Pharmaceuticals stock needs to break above the trend line that represents price resistance.
Until such a development occurs, the bearish trend is still in development and lower prices are likely to prevail.
The good news is that resistance is currently being tested. If AMPE stock can sustain a close above $3.00, it will negate the bearish trend, suggesting that higher prices are likely to prevail.
This notion that higher prices will follow is magnified by the fact that the descending channel doubles as a consolidation wave. The implications of this development are highlighted on the following stock chart.
Chart courtesy of StockCharts.com
This Ampio Pharmaceuticals stock chart highlights a wave structure and an influential momentum indicator that have been responsible for creating and sustaining a bullish trend.
The wave structure consists of impulse waves and consolidation waves.
The waves highlighted in green on the above chart are impulse waves. They capture the stage in a bullish trend when the price of a stock sustains a progressive move toward higher prices.
The waves highlighted in purple are consolidation waves. They capture the stage in a bullish trend when the price of a stock corrects and refrains from advancing.
As I mentioned earlier, the descending channel doubles as a consolidation wave. Once this wave is completed, higher AMPE stock prices, via an impulse wave, are expected to follow.
At the moment, a sustained close above $3.00 would suggest that an impulse wave is in development. In order to confirm this, a bullish signal from the moving average convergence/divergence (MACD) indicator is needed.
MACD is an influential momentum indicator that uses the crossing of a signal line to distinguish whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices, while bearish momentum implies that a stock is geared toward lower prices.
Momentum is a very influential force because a stock cannot sustain a move in either direction unless the applicable momentum is supporting it.
This is why, in a bullish trend, impulse waves have been accompanied by a bullish MACD signal. Similarly, consolidation waves have been accompanied a bearish MACD signal.
The MACD indicator is currently converging, and a bullish signal is likely to be generated in the week ahead. This bullish signal, along with a sustained close above $3.00, would set the wheels in motion and suggest a much higher Ampio stock price on the horizon.
I am watching the development of a technical price pattern and an influential momentum indicator on the Ampio Pharmaceuticals stock chart.
I believe that, when both technical indicators generate bullish signals, a sustained move toward higher AMPE stock prices will follow.