BOX Stock Breaks Out, Implying That Higher Stock Prices Are in Development

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BOX Stock: The Path of Least Resistance Is Geared Toward Higher Stock Prices

I am focusing on Box Inc (NYSE:BOX) stock because certain developments highlighted in my September 1 report titled “BOX Stock Is Coiling Like a Spring, Getting Ready to Jump” have been resolved, and these developments are implying that BOX stock is now in the process of making a move toward higher stock prices.

These developments are all technical in nature, which means I am using the company’s stock chart to determine whether this investment is inclined to make a bullish advance or a bearish decline. This method of analysis is called technical analysis, and I have been using it to create investment strategies for almost two decades. This method is not perfect, but, when it is applied diligently and appropriately, the results have a tendency to produce excellent results.

The following BOX stock chart illustrates the completed technical price pattern that is currently suggesting that higher stock prices are on the horizon.

box price chart

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Chart courtesy of StockCharts.com

Since June 1, 2017, Box shares have been confined within a well-developed trading range. This trading range was bound by price resistance at $20.25 and price support at $17.50.

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Trading ranges such as this one act like coiled springs, and every time the stock price is rejected by a level of price support or price resistance, it causes momentum to build within the pattern.

Larger and longer patterns with an increased number of contacts with support and resistance have a tendency to store more momentum within the pattern, creating particularly powerful price patterns. The power from these patterns is finally released when the stock price musters enough strength to break above price resistance or fall below price support.

On October 18, Box stock closed above price resistance, which completed the technical price pattern. This event is highlighted on the stock chart as a breakout, and it is now implying that an explosive move to the upside is in the making.

This bullish view that higher stock prices are on the horizon is predicated on the notion that the stock price remains above the trading range and does not re-enter it. The completed trading range implying higher prices is also instrumental in managing risk.

The bullish resolution of the trading range was not a surprise, and I had mentioned in my previous publication that I had the inclination to believe that this outcome would occur because the price action that preceded it was bullish in nature, which supported the notion of a bullish breakout.

The following BOX stock chart illustrates the bullish price action that preceded the trading range.

BOX stock chart

Chart courtesy of StockCharts.com

This price chart illustrates a trend that contains a sequence of higher highs and higher lows, which is the quintessential characteristic that defines a bullish trend. This bullish trend began in July 2016 and it has progressively moved toward higher stock prices.

In September 2016, an indication was generated when the 50-day moving average, which is highlighted in blue, crossed above the 200-day moving average, which is highlighted in red. This indication is known as a golden cross, and it serves to suggest that a bull market is in development.

This was one of the first indications suggesting that a bull market was in development. The moving averages that created this indication have remained in bullish alignment, which continues to suggest that higher stock prices are on the horizon.

Prior to breaking out of the trading range, Box stock tested the 200-day moving average. This moving average is very influential because, aside from generating a golden cross, it is also used as a dividing line that separates bullish investments from bearish ones. Trading above it is a bullish indication, while trading below it is a bearish one.

In August, BOX stock closed above the 200-day moving average, suggesting that this stock has transitioned from a bearish investment into a bullish one, making it one of the first indications suggesting that a bull market was in development.

Testing this level from above and maintaining its stature above it was a testament to this investment’s strength. Right after this feat was accomplished, BOX broke out of its trading range and created a new 52-week high in the process.

Analyst Take: 

BOX stock has completed a technical price pattern by breaking above the level of resistance that defined it. This feat is suggesting that higher stock prices are now in development. Given that this bullish view was generated using the company’s stock chart, I will continue to view this investment with a bullish light until there are indications on the company’s stock chart which suggest that another view is warranted.