AAOI Stock: The Bulls Are in Control
Wow! Applied Optoelectronics Inc (NASDAQ:AAOI) stock is surging and the rapid pace of gains is just relentless. This year alone, AAOI stock is up 302.3%, which is outstanding and quite astonishing. In all honesty, these gains are not a total surprise because I did mention my bullish views on this company in a previous report titled “The Sky Is the Limit for Applied Optoelectronics Stock.” In that report, I outlined a particular technical price pattern on the company’s stock chart that was suggesting that higher stock prices were a likely endeavor.
At the time this publication was written on May 30, 2017, AAOI stock was trading at $70.46. In very short order, the share price has appreciated to the tune of 33.38%. Even though the gains are not a complete surprise, the rate at which this investment appreciated is. If you’re wondering how I generated this bullish view, the methodology I use is known as technical analysis, and this method of investment analysis is predicated on using historical price and volume data points to project where the stock is heading.
The dynamic that suggested that this stock was set to soar was when it was finally able clear the previous all-time high at $28.01, which was established seven months after the stock began trading publicly. This level of resistance stood for 35 months before it was finally broken, and the bullish run towards higher prices that followed has been relentless.
The following Applied Optoelectronics stock chart illustrates the developments that initiated and support a bullish view on this company.
Chart courtesy of StockCharts.com
This AAOI stock chart illustrates the price action that has consumed this investment since inception.
Breaking above a previous all-time high, such as this one, creates an environment where all bullish investors are sitting tight, holding profitable positions, which leaves little inclination to sell. At the same time, all bearish investors are sweating as their positions are all in the red and the losses continue to mount, increasing their inclination to close out their positions by buying back the shares they sold.
This dynamic creates the scenario with new entrants, who are chasing momentum, and short sellers, who have a need to close out a position, which creates an insatiable demand at a time where sellers are reluctant to sell their winning positions. A panic buying spree is created, and it is why stocks tend to appreciate at such speeds under such conditions.
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I have the inclination to believe that Applied Optoelectronics stock still has legs to run because there is little to suggest that the demand which is fueling this run in AAOI stock is running out of steam.
This bullish inclination is a direct result of the indication that is presented on following Applied Optoelectronics stock chart.
Chart courtesy of StockCharts.com
This AAOI stock chart illustrates a beautiful bullish trend that has been in development since May 2016. This bullish trend contains the quintessential characteristic that defines all bullish trends: a series of higher highs and higher lows. The picture it creates is a work of art, and as a trader and investor, it’s something I could appreciate looking at all day long.
This bullish trend has been supported by the trend-following momentum indicator known as “MACD,” or moving average convergence/divergence. This momentum indicator uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the trading action.
In July 2016, a bullish cross was generated, indicating that bullish momentum was influencing the stock price, which created a path of least resistance that was geared towards higher stock prices, and has been off to the races ever since.
The MACD indicator was in danger of generating a bearish signal on numerous occasions but the bullish camp was quick to step in and avert this. Averted bearish signals should never be ignored because they are an indication of the underlying inherent strength that is contained within that investment. A testament to this notion is that every time an averted signal was generated, it fueled a new advance that only acted to accelerate the bullish trend that is still in development.
As long as the MACD indicator remains in bullish alignment, I can only presume that this bullish trend towards higher stock prices is set to persist, which reinforces the adage “the trend is your friend.”
Last Words on Applied Optoelectronics Stock
Applied Optoelectronics stock has been a rocket ship of a ride towards higher stock prices, and there is little to suggest that the bullish trend that has been fueling this investment is going to end anytime soon. This bullish view was generated using indications that were generated on the AAOI stock chart, and therefore it is contingent on these indications remaining in bullish alignment.