Bombardier Stock: Launch Initiated
I have been waiting for Bombardier, Inc. (TSE:BBD.B) stock to complete a bullish price pattern for quite some time, and I alluded to this pattern in my previous report on BBD.B stock. I have outlined the concept that, once this price pattern is finally completed and the price breaks out in a bullish manner, a large upside move is set to proceed.
The wait is no more, because BBD.B stock has finally achieved this much-awaited feat, and I am now expecting a surge in Bombardier stock.
The method of analysis that I use to create my trading strategies and investment views is based on technical analysis. Technical analysis alleges that past data can be used to discern trends and project future prices. My beliefs that Bombardier stock is set to surge higher in price are based on this body of knowledge.
The following Bombardier stock chart illustrates the bullish pattern that has just completed.
Chart courtesy of StockCharts.com
The bullish pattern that is illustrated on the chart above began in early February as BBD.B stock surged off of the lows.
This surge in price is referred to as an impulse wave. Bullish impulse waves are trending waves that take the price to a new level and usually end in an overbought condition that prevents the price from advancing any further. The wave that follows is the consolidation wave, and these waves act to alleviate the overbought conditions and to set up the next prevailing impulse wave.
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). A golden cross creates a bullish tailwind in which the path of least resistance is higher, and therefore a price advance can be expected.
While this golden cross was engaged, Bombardier stock spent the next 7.5 months trading within a consolidation wave, alleviating the overbought condition that was created when the price surged.
While developing this wave, 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 served to reaffirm that bullish tailwinds were swirling.
In my previous report on Bombardier stock, I mentioned that the moving averages that generated the golden cross were beginning to converge and, in order for this signal to remain intact, the price needed to move higher. A higher price in Bombardier stock would require breaking above the consolidation wave.
This is exactly what occurred, and it is highlighted on the chart above as a breakout.
This breakout also completed a much larger pattern, as illustrated on the Bombardier stock chart below.
Chart courtesy of StockCharts.com
The formation highlighted in pink is a bullish setup pattern known to traders as a cup and handle formation. Traders use these setup patterns to identify patterns against which to trade. Patterns such as these are instrumental because they provide the direction of the trend and a potential price objective.
The breakout of the consolidation wave also caused this pattern to complete, as the price closed above the horizontal resistance level highlighted in blue. The theory behind these patterns is that the depth of the cup can be used to project a possible price objective by extrapolating it above the horizontal level of resistance that completed the pattern.
Based on this theory, the price objective of the cup and handle pattern is $3.30 on BBD.B stock.
The indicator in the lower panel labeled “MACD” supports this notion of higher prices, as a bullish cross was just generated. Moving average convergence/divergence (MACD) is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. A bullish cross indicates that bullish momentum is outpacing bearish momentum and, as a result, the path of least resistance for BBD.B stock is higher.
Bottom Line on Bombardier Stock
The long-waited bullish pattern in Bombardier stock is finally complete and, as a result, I expect a surge in BBD.B stock to follow.