Bombardier Stock: Anticipating the Launch
Bombardier, Inc. (TSE:BBD.B) stock has been progressing, and the pattern I outlined in my previous report on Bombardier stock continues to play out. If the price continues to act in this manner, the potential large move to the upside will finally be upon Bombardier stock investors.
This large move in the BBD.B stock price is contingent on the technical price pattern. When this pattern is finally complete, it will signal that a bullish move is at hand. At the moment, the price is still confined by this pattern, and therefore it is always prudent to wait for a pattern to complete, versus speculating that it will.
For those not familiar with my style of investment analysis, I use price action to determine if I am bullish or bearish on an investment. The foundation to my investment research is technical analysis. Technical analysis uses past data and volume to discern trends and forecast future prices. This method of analysis has been instrumental in setting up systematic investment strategies.
The following Bombardier stock chart illustrates the pattern I am referencing.
Chart courtesy of StockCharts.com
The pattern in question has been in development for nine months and, while there has been price progression, the bullish breakout I am anticipating has yet to show its face.
The pattern is very constructive, and this can be seen by the way the pattern is structured. The move off of the February low to the April high is highlighted as an impulse wave. An impulse wave is a trending move that takes a price to a new level. The wave that follows an impulse wave is known as a consolidation wave. It is in these waves that the new price is digested, overbought conditions are alleviated, and the setup for the next trending move is contained.
When Bombardier stock completed the impulse wave, a golden cross was generated. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). This signal is used by traders to confirm that a bull market is on the horizon.
A golden cross creates a bullish tailwind, and this tailwind increases the odds that a price pattern like the consolidation wave will resolve itself in a bullish manner.
The consolidation wave is now seven months in the making, and the price continues to oscillate between support resistance outlined by the descending channel that has been created. Within this channel, Bombardier stock managed to successfully test the 200-day moving average. The 200-day moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market.
When the share price is above the moving average, it is bullish; when the share price is below the moving average, it is bearish. The ability to remain above this level as the price pulled back only serves to reaffirm the bullish premise, and increases the odds of a bullish breakout.
Bombardier stock is testing resistance once again, and the moving averages are beginning to converge. In order for a bearish signal to be averted, the price needs to move higher and this would require a breakout of the consolidation wave. If Bombardier is going to break out, it will need to happen soon.
If a successful breakout does occur, that pattern is extremely constructive in that respect because the pattern will provide an initial upside price target. The theory behind impulse waves and consolidation waves is that, once a consolidation wave is completed, the new impulse wave tends to match the previous impulse wave in length and duration.
As a result, the bullish price objective upon a successful breakout on Bombardier stock would be $3.20.
Bottom Line on Bombardier stock
Bombardier stock has been setting up a bullish setup pattern for approximately nine months, and it has yet to be completed. Some signals are at risk of reversing, and this would put a damper on the bullish tailwinds that have developed. In order for these signals to remain bullish, BBD.B stock will need to break out soon.