BBD.B Stock: Awaiting Take Off
Bombardier, Inc. (TSE:BBD.B) stock has been getting a lot of attention in the past few years, and unfortunately for all the wrong reasons. This company has experienced major setbacks regarding aviation and streetcar projects and, as a result, management has lost a great deal of credibility. Investors have felt the brunt of this as the BBD.B stock price has suffered considerably.
2016 marks a year during which Bombardier stock hit an all-time low at $0.72 a share. I can go on about this company’s poor performance and the reasons for it, but that is not my intention. My intentions are quite to the contrary, as I try to paint some bullish light on this picture. The chart of BBD.B stock has piqued my interest and has given me reason to believe that some bullish price action may have presented itself.
The following chart illustrates the bullish pattern that piqued my interest.
Chart courtesy of StockCharts.com
In April 2016, Bombardier stock executed a golden cross. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is on the horizon. It is wise to trade in the direction of this signal. A trader’s position should either be long or neutral.
The trading action on this price chart serves to reaffirm the golden cross and vice versa. Bullish trading action is defined by impulse waves (highlighted in green) followed by consolidation waves (highlighted in purple). A bullish resolution of this wave would give way for another impulse wave that would match the size and length of the first impulse wave that is highlighted on the chart. Bullish trending markets are littered with this type of trading action.
The consolidation wave that is developing comes in the form a descending channel. There are two parallel lines that define this trend. A descending channel has two trend lines that define the upper and lower bounds. The share price oscillates between these two lines for as long as the trend permits.
Consolidation waves that trend against the predominant trend are bullish. This makes this pattern especially attractive; the price objective of a bullish resolution to this pattern is north of $3.00.
The following Bombardier stock chart illustrates the predominant trend.
Chart courtesy of StockCharts.com
The downtrend that has developed is clear as day, and is defined by the trend line (highlighted in blue). This line is created by connecting the peaks on a price chart. A downtrend is defined by lower lows, confirmed by lower highs. It can easily be identified as price moves from the upper left to the lower right. This is clear example of bearish price action. Shares will continue to trade with a bearish bias for as long as the trend remains intact.
The pink line labeled “Resistance” marks the previous area of support for BBD.B stock. This price point acted as support on many occasions, and it finally gave out in 2015. As is always the case, when a level of support is penetrated, it becomes a level of resistance. BBD.B stock is currently testing this level. If Bombardier stock can successfully break above this level, the next target would be the downtrend line. Major resistance resides at just under $4.00, which is defined by this trend line.
If and when BBD.B stock breaks out of this downtrend, a new bull market would have already begun.
The Bottom Line on BBD.B Stock
Bombardier stock has a lot of work ahead of it before the larger picture becomes bullish, but the current price action is constructive. If the current pattern resolves itself in a bullish manner, the dominant downtrend line that has contained prices price will be tested. My bias is neutral, and I am awaiting a resolution of the descending channel to change my short-term bias on BBD.B stock.