ATEN Stock: Is This Sleeper Stock About to Be Woken Up?
Stocks have a tendency to lull people to sleep before making huge moves. This happens time and time again. As investors, we always look back and wish we were part of these huge moves. In essence, this is what we are seeking when we do our due diligence and invest our hard-earned money in a company’s stock.
Some of these “sleeper stocks,” as I call them, contained certain characteristics that were telltale signs that the stock was setting up to make a move. It was only in hindsight that these characteristics become obvious.
For instance, I am currently watching A10 Networks Inc (NYSE:ATEN) because I believe that this company is potentially one of those sleeper stocks.
The characteristics that have piqued my interest in A10 Networks stock are all technical in nature, which means they are all based on the company’s stock chart.
For starters, this sleeper stock has been painting quite a compelling picture on its stock chart since September 2016.
The picture is actually a technical price pattern, and it has been highlighted on the following ATEN stock chart.
Chart courtesy of StockCharts.com
The pattern highlighted on the chart above is known as a falling wedge.
This pattern is created when the price action is characterized by a series of lower highs and lower lows. This price action is the quintessential characteristic of a bearish trend.
What sets this pattern apart from a conventional bearish trend is best visualized when trend lines are applied to the peaks and troughs created by the price action.
As you can see in the chart above, these trend lines depict a precise price pattern with many points of contact. The trend lines that depict this pattern have been converging and, as time progressed, the range between price support and price resistance contracted.
This falling wedge has been developing since September 2016, when ATEN stock peaked at $10.86.
Due to the shape of the pattern, its development cannot continue forever. At some point, the stock will either break above price resistance or fall below price support.
I have dubbed this stock a sleeper stock because, at the moment, it is testing resistance at $6.80. All that A10 Networks stock needs to do to initiate a directional move toward higher stock prices is to break above the resistance level.
I am inclined to believe that such a development is likely to occur in the near future because a very influential momentum indicator is on the cusp of generating a bullish signal, which would ultimately support this outcome.
The momentum indicator on the cusp of generating a bullish signal is highlighted on the following A10 Networks stock chart.
Chart courtesy of StockCharts.com
This chart above highlights the moving average convergence/divergence (MACD) indicator using a monthly scale.
MACD is a simple yet extremely effective technical indicator that is used to indicate whether bullish or bearish momentum is influencing the price action in a stock.
This indicator is very important because a stock cannot sustain a directional move unless the applicable level of momentum is supporting it.
Bullish momentum is like a tailwind that creates a path of least resistance toward higher stock prices, while bearish momentum is like a headwind that creates a path of least resistance toward lower stock prices.
In July 2017, a bearish MACD signal was generated and the first in a series of lower lows was created.
This monthly MACD signal solidified the idea that, for the foreseeable future, lower A10 Networks stock prices would likely follow because bearish momentum was influencing the price action.
Nineteen months later, the signal lines that created the bearish MACD signal have been converging and are set to cross. A bullish MACD signal is now imminent, and it will suggest that the tide has shifted, wherein bullish momentum is now influencing the price action in ATEN stock.
This is the momentum needed to sustain a move toward higher prices. It couldn’t come at a better time, since resistance outlined by the falling wedge is currently being tested.
A breakout of this pattern in the next few weeks would generate a coinciding signal which, in turn, would wake this sleeper stock and turn it into a runner.
I am watching the A10 Networks stock chart because it is on the cusp of a breakout.
The condition surrounding this stock is ripe; if this event unfolds, we will likely see much higher ATEN stock prices.