BBD.B Stock: Constructive Developments
It is time to once again to update my outlook on Bombardier, Inc. (TSE:BBD.B) stock. There have been significant developments since my last publication that need to be addressed. I have been carrying a bullish view on Bombardier stock for some time now, and my bullish view has been justified because BBD.B stock continues to generate constructive developments. The focus of this publication is just that; there are new constructive developments on the price chart that are setting up the next major move in the stock’s price.
If you haven’t yet realized, I produce my views on an investment by analyzing its price chart. The price chart gives indications that can be interpreted as bullish or bearish. These indications are then grouped together to produce a generalized view on which direction the investment is trending in. This method of analysis is known as “technical analysis,” and I have been a student of this style of investment analysis for nearly two decades. I apply this method of analysis to my investment strategies because it keeps my strategies disciplined using timely information.
The price chart below is an exhibit of what constructive price action should look like. Constructive price action consists of an alternating wave structure that is an essential ingredient in creating a sustainable trend.
The following Bombardier stock chart illustrates the constructive price action that is now in development.
Chart courtesy of StockCharts.com
The price chart above is an exhibit of what constructive price action should look like. Constructive price action consists of an alternating wave structure that is an essential ingredient in creating a sustainable trend.
The impulse wave that is highlighted in green serves as a wave of price progression. The purpose of this wave to move the stock price. This can come in either an upward or downward direction, but what remains consistent is that the stock is in a trending environment.
The consolidation wave that is highlighted in purple serves as a midpoint. The purpose of this wave is to unwind any extreme conditions that were created, and more importantly, set up the next impulse wave. These waves are characterized with a lack of progression as they usually exhibit a range-bound trading environment that on average moves counter to the predominant trend.
These two waves feed off each other, which keeps the trend orderly and stable. This is why these waves are a necessary characteristic in a sustainable trend.
I tend to focus much of my attention seeking out consolidation waves because they set up the next trending environment in the stock price. Consolidation waves take longer to develop than impulse waves, so it is imperative to catch an impulse wave as it is developing. The indication that an impulse wave is set to develop will occur when price exits the consolidation wave. This exit is characterized by the stock price closing above or below the purple converging trend lines.
You will notice that the consolidation wave is developing right on top of the 200-day moving average. This moving average is very significant because it serves as the dividing line between stocks trading in a bull market and those trading in a bear market.
Using it as a tool is quite simple; if Bombardier stock is trading above this moving average, it is bullish. If it is trading below it, it is bearish. BBD.B stock continues to find support at this moving average, because bullish investors are eager to come in and support it at this significant level.
The following Bombardier stock chart illustrates that this constructive price action has been developing on a bullish backdrop.
Chart courtesy of StockCharts.com
A bullish backdrop is being generated by a completed cup and handle pattern. This bullish pattern was completed in December 2016, and is suggesting that higher stock prices are likely to follow.
This pattern was created as a result of Bombardier shares failing to break above the key price point of resistance at $2.00. It took numerous attempts to break beyond this level, and it is not a coincidence that Bombardier shares are now finding support at this previous level of resistance. As the saying goes, when a significant level of resistance is broken, it becomes a new level of price support.
This price pattern created the bullish backdrop, and it also generated a potential price objective. This bullish price objective is created by taking the depth of the cup and extrapolating it above the key level at $2.00. As a result, the price objective of this cup and handle pattern is $3.30.
The moving average convergence/divergence (MACD) indicator, which is used to distinguish between bullish and bearish momentum, is still in bearish alignment. That said, the MACD indicator is converging, which is suggesting that bearish momentum is starting to subside. It is very common for consolidation waves to develop while this indicator is in bearish alignment. This allows any overbought conditions that were created to be unwound. A previous example of this type of price action can be seen in the development of the “handle” in the cup and handle formation.
A bullish MACD cross will most likely coincide with the completion of the consolidation wave. A bullish MACD indicator would be suggesting that bullish momentum is governing BBD.B stock, where that path of least resistance is tilted towards higher prices, putting the price objective into play.
Bottom Line on Bombardier Stock
I continue to view Bombardier stock in a bullish light. A consolidation pattern is currently in development, and its completion will dictate whether higher or lower BBD.B stock prices will follow.