BBD.D Stock: Bottomed
Bombardier, Inc. (TSE:BBD.B) stock has been punished over the years, as the trend toward lower prices has been painfully and utterly relentless. BBD.B stock hit a low of $0.72 in February, and I believe that this price level marked the lows of this bear market.
If my analysis is correct, this price will never be revisited because the price represents a level that could not be rationalized by any fundamental valuation. This price level was attained by a trend that was driven by investor emotions that lasted longer than anyone thought possible. This caused Bombardier stock to overshoot to the downside.
My view on BBD.B stock will only be confirmed by the price. I use technical analysis to screen potential investments, and this body of knowledge is based on past price and volume data to discern trends and to forecast the future direction of prices.
The possibility that a long-lasting bottom has been put in stems from the pattern that followed it, and it is illustrated on the below Bombardier stock chart.
Chart courtesy of StockCharts.com
The price action that proceeded the bottom in February can only be interpreted as bullish. An impulse wave quickly developed off of the lows, and BBD.B stock surged to a high of $2.28 in short order. In the process, a bullish signal was generated.
After the impulse wave was complete, Bombardier stock generated a golden cross. This 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 to confirm that a bullish trend is in play. I have found this signal to be so useful that I have decided never to trade against it. When this signal is bullish, I can only justify taking long positions.
The setup that is playing out at the moment on the Bombardier stock price chart is a consolidation wave. Consolidation waves are a congestion zone where bulls and bears meet a temporary level of equilibrium. These patterns are necessary, and are instrumental in setting up another impulse wave. A break above the upper level of resistance would allow another leg higher to commence, and would reaffirm my bullish outlook.
In the process of this wave, BBD.B stock has managed to test the 200-day moving average from above. 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.
The following Bombardier stock chart illustrates the price action that tested the 200-day moving average.
Chart courtesy of StockCharts.com
Bombardier stock tested the 200-day moving average at the end of September. This level of support held, and BBD.B stock continues to trade above it.
The test was confirmed after BBD.B stock broke above the downtrend line, and then an impulse wave quickly developed. This wave was followed by a consolidation wave. Bullish price action is characterized by this type of price activity.
This consolidation wave has just completed, and a new impulse wave is developing that would open up the possibility that the larger consolidation wave will test resistance. The price objective of this bullish impulse wave is $2.00, and this coincides with resistance of the larger consolidation wave.
Both bullish patterns look similar, and bull markets are developed on this type of price action.
The Bottom Line on Bombardier Stock
I am bullishly optimistic on Bombardier stock, and this notion is heavily weighted on my belief that the pattern will resolve itself in a bullish manner. All the signals are indicating that bullish tailwinds are prevailing, and that a bullish outcome in BBD.B stock is probable.