Bombardier Stock’s Next Move Is Based on This Price Pattern
BBD.B Stock: Setting Up to Move
Bombardier, Inc. (TSE:BBD.B) stock is currently sitting at an important juncture. Depending on what happens next will dictate whether the bull market that began in February 2016, will continue.
I am leaning toward the bullish camp because there are still indications on the Bombardier stock chart that support this view. The problem arises that any price weakness in BBD.B stock can potentially negate many of the indications that are supporting this bullish advance.
To clarify for anyone who has not read any of my previous work, I use technical analysis to generate my investment views. This method of investment analysis is predicated on the notion that historical price and volume data can be used to discern trends and forecast future prices. All this data is found on a stock chart, and this is where my analysis takes place. I have been refining my skill in this method of analysis for nearly two decades and I have become proficient in analyzing a stock chart.
In December 2016, a technical price pattern was completed that served to suggest that higher Bombardier stock prices were likely to follow. This technical price pattern is illustrated on the following stock chart.
Chart courtesy of StockCharts.com
The pattern that is illustrated on the stock chart above is a “cup & handle” pattern and, like many of its peer patterns, its name effectively describes the shape that the pattern creates.
This pattern is created when a price reaches a significant level of resistance and then a selloff ensues. The second time this level of resistance is tested, another selloff ensues, but this time the reaction is much smaller. These reactions off of the important level of resistance create the cup & handle pattern. This pattern is finally completed when the share prices close above the level of resistance that rejected the price on the previous two occasions.
In December 2016, Bombardier share completed this cup & handle pattern, which served to suggest that higher price were on the horizon. This technical price pattern was also instrumental in providing a potential price objective of $3.30. This objective was obtained by taking the depth of the cup and extrapolating it above the horizontal level of resistance. This target is still in play, predicated on the notion that BBD.B stock remains above the horizontal level of resistance that completed the cup & handle pattern.
Bombardier stock is now currently sitting right on top of this price point, and this level has been providing support. Returning to test a previous level of resistance from above is not an uncommon event. It serves to reinforce the notion that the break above resistance was legitimate, as well as, defining this price point as a new level of price support.
The following Bombardier price chart illustrates the indications that have supported the advance following the lows that were created in February 2016.
Chart courtesy of StockCharts.com
The price action on the chart above has been constructive. The constructive bullish price action consists of a two-wave structure involving impulse waves and consolidation waves.
The impulse waves are highlighted in green on the chart above, and they serve to advance the price of the stock in a linear motion. The consolidation wave is highlighted in purple, and it serves to unwind any overbought conditions that were created, and set up the next advancing impulse wave. This alternating wave structure allows a trend to remain sustainable.
This constructive bullish price action has been supported by a golden cross that was generated in April 2016. A golden cross is a bullish signal that is produced when the faster 50-day moving average, highlighted in blue, crosses above the slower 200-day moving average, highlighted in red. This signal is used to confirm that a bull market is in development and, as result, I find it wise to tilt my bias in the direction of suggested by this indicator.
In late December 2016, BBD.B stock exited the consolidation waves, suggesting that a new impulse wave was set to develop. After an initial surge, a correction ensued and BBD.B shares are now testing the consolidation wave from above. This level currently coincides with the 200-day moving average. The 200-day moving average is an important level because it is the dividing line between stock trading in a bull market versus stocks trading in a bear market. It is known to act as a level of price support or resistance.
Thus far, I have outlined that Bombardier shares are currently testing an important level of price support that is supported by three different metrics. This suggests that support is very strong at this level. In order to maintain a bullish view on BBD.B shares the price must remain above these levels of support, and stage an advance.
The following Bombardier stock chart illustrates the trading range that will dictate the next direction that BBD.B shares will head in.
Chart courtesy of StockCharts.com
The stock chart above illustrates the trading action using a one-hour scale. This scale helps illustrate the trading range that has developed right on top of the important level of price support that has already been identified. The next direction in Bombardier shares will be dictated by its ability to break out of this trading range. A break above resistance would suggest that higher prices are likely, and a break below the support level would suggest bearish implications, including lower stock prices.
I believe that this pattern will resolve itself in a bullish manner, because the indications on the stock chart continue to support an advance. As a result, I would be looking for a move above $2.16 to suggest that an advance is set to take place.
Bottom Line on Bombardier
Bombardier stock is testing an extremely important level of price support. Based on the current indications on the stock chart, I believe that this level of support will hold, implying that the bull market in BBD.B stock is still intact, and that higher prices are still on the horizon.
