BMY Stock: A Break Above $57.50 Will Set the Wheels in Motion
The pharmaceutical names are back in the limelight, and this time it’s for all the right reasons. It is why I am focusing on Bristol-Myers Squibb Co (NYSE:BMY) stock. There are a number of indications on the BMY stock chart that are starting to suggest that the stock is getting ready to stage a price advance.
This is great news because this sector has been under pressure. A shadow was cast on this sector after a few select companies were caught using predatory pricing polices to inflate their bottom lines. These practices made headlines, and as a result, politicians vowed to curb them. This of course created confusion as to the what the future may bring.
Confusion breeds contempt, and therefore there was every reason not to own these names. This created the shadow that was cast on this sector and it is what caused the pharmaceutical sector to lag behind the general market, which was advancing and forging new highs.
Washington is set to announce laws that will curb these policies and the investment community will finally be able to quantity the ramifications and repercussions these policies will entail. This will lift the shadow that was cast on this sector, and individual companies will be able to stand on their own two feet.
BMY stock is already showing signs of staging an advance, and the following Bristol Myers stock chart illustrates an indicator that is supporting the notion of higher prices.
Chart courtesy of StockCharts.com
This stock chart focuses on indications that are generated using the crossing of the 50-day and 200-day moving averages. These moving average crosses create either a bullish or bearish indication.
A bearish indication is generated when the faster 50-day moving average closes below the slower 200-day moving average. This bearish signal is called a “death cross” and it is used to indicate that a bear market is in development.
In September 2016, a death cross was generated. While this indicator was in bearish alignment, BMY stock failed to stage a price advance, and lower prices were the order of the day.
A bullish indication is generated when the the faster 50-day moving average closes above the slower 200-day moving average. This bullish signal is called a “golden cross” and it is used to indicate that a bull market is in development.
In June of this year, a golden cross was generated, and just like the death cross signaled that bear market was in development, the golden cross is now signaling that a bull market is in development.
There is never one indicator that is foolproof, and therefore I always employ multiple indications in order to generate a view on an investment.
The following stock chart illustrates constructive price action that can be used to forecast the next direction the Bristol Myers stock price is set to take.
Chart courtesy of StockCharts.com
The chart is highlighted to define constructive price action. Constructive price action consists of impulse waves and consolidation waves. These waves create the necessary ingredients to build and sustain a trend.
The impulse wave, which is highlighted in green, defines the point in a bullish trend where the stock stages a price advance. The consolidation wave, which is highlighted in purple, defines the point in a bullish trend where a stock price pulls back from its highs in order to alleviate any overbought conditions that were created during the impulse wave. Unwinding an overbought condition creates the necessary environment for a new impulse wave to develop.
BMY stock is currently within the confines of a consolidation wave. Whether the stock price breaks up or down will determine which direction the stock is heading in next. Given that a golden cross was just created, it increases the odds that this wave will resolve itself in a bullish manner. In order to confirm this view, the stock price must close above $57.50. Once this level is cleared, it will open the door for the stock to stage an advance, and an impulse wave like the one that preceded it can be expected to develop.
Bottom Line on Bristol Myers Stock
A number of technical indicators have swung into bullish alignment, which serves to suggest that a bull market is now in development. This suggestion will be confirmed when BMY stock price closes above $57.50, at which point higher prices will be expected to follow.