BOX Stock Breaks Out, Lands Rock-Star Top-Pick Status
Sustaining a move toward higher prices has been a stubborn chore for the markets, and the price action is a testament to this notion. Since late January, the market indices have been forging a series of lower highs, which is not a trend I would like to see sustained.
The good news is that markets continue to maintain their footing above key levels of price support, and volatility has subsided in recent weeks. These factors imply that perhaps the markets are primed to make an attempt at reversing this trend of lower highs.
I have stated numerous times that, as long as the markets continue to stay perched above key levels of price support, I will continue to carry a bullish bias. This is why I continue to focus on investments that are primed for such an outcome.
This time around, I have come across something really special. This “something really special” is Box Inc (NYSE:BOX) stock, and the reason why I believe so is that a number of technical indications are suggesting that Box stock has likely just begun an epic move toward higher stock prices.
The first set of indications are highlighted on the following BOX stock chart.
Chart courtesy of StockCharts.com
This Box stock chart highlights a trading range that was bound by price resistance at $24.00 and price support at $17.50.
In the last week of April, Box stock broke above resistance, suggesting that the next sustained move would be toward higher stock prices. This suggested move is being reinforced by the moving average convergence/divergence (MACD) indicator.
MACD is a simple yet effective momentum indicator that distinguishes whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices, while bearish momentum implies that a stock is geared toward lower prices.
The reason why this indicator carries an “influential” status is that a sustained move in either direction cannot occur unless the appropriate level of momentum is supporting it.
For instance, in December 2017, a bearish MACD signal implied that lower prices were likely to prevail. The entire time this signal was in bearish alignment, BOX stock refrained from advancing.
It wasn’t until the end of April 2018 that the MACD indicator finally swung into bullish alignment, implying that higher prices were likely to follow. Consequently, a break of resistance quickly followed.
These indications suggest that Box stock is likely to appreciate, which is great. But what makes this stock really stand out is the technical price pattern that is highlighted on the following chart.
Chart courtesy of StockCharts.com
This stock chart illustrates that, since inception, the price action has been creating a technical price pattern known as a cup and handle pattern.
This cup and handle price pattern was created because a significant level of price resistance, which resided at $24.00, prevented the stock price from advancing.
This inability to advance resulted in the creation of two distinct troughs. The first trough is much larger than the second, creating what looks like a teacup. This is where the name “cup and handle” was derived.
The trading range highlighted earlier is the “handle” that created this pattern. Breaking above resistance at $24.00 completed this very large cup and handle price pattern, implying that much higher stock prices were likely to follow.
Aside from suggesting that higher prices are likely to follow, the cup and handle also implies how high these prices may go.
Generating this price objective is simply done by taking the depth of the cup and extrapolating that value above the significant level of resistance that was responsible for creating the pattern in the first place. Applying this method produces a price objective of $38.00.
This objective is reason enough to get excited, but it is not where this stock got its rock-star status from. Completing the pattern also resulted in Box stock breaking above a long-standing all-time high. This long-standing all-time high is special because it was created shortly after inception.
This is a characteristic shared among stocks that have experienced the most epic moves toward higher prices. Perhaps Shopify Inc (NYSE:SHOP) or Facebook, Inc. (NASDAQ:FB) ring a bell; both of these stocks shared a similar long-standing high.
Breaking above a long-standing high removes the last level of price resistance that could contain the stock price from advancing.
Without a level of resistance to contain the stock price, the sky is the limit, creating the perfect environment that can fuel an epic move toward higher prices.
I am bullish on Box stock because its price chart carries a characteristic that has been known for creating epic runs toward higher stock prices, and I don’t believe that this time will be any different.