By Patrick Brik, BAS, CFA, CMT

Published: November 9, 2016

About the Author

Patrick Brik, BAS, CFA, CMT
Read Full Bio

Advertisement

Commscope Stock: This Is Why COMM Stock Could Surge

Comm stockCOMM Stock: Breakout  Is Imminent

Commscope Holding Company Inc (NASDAQ:COMM) stock is setting up to move, and this provider of infrastructure solutions for wireless, business enterprise, and residential broadband networks is on the verge of a tremendous breakout that could take COMM stock to new heights.

I analyze investments from multiple standpoints, but I have found nothing more compelling than technical analysis. This knowledge base uses price and volume to discern trends and forecast future prices. As a trader, this style of analysis is the only method that I have found that could provide timely triggers to getting in or out of a trade. It has also been instrumental in my strategies, as I have found chart patterns to be an effective way to project potential price objectives.

The tremendous breakout that I am referring to stems from the chart pattern that has appeared on the Commscope stock price chart. This pattern has the potential to send COMM stock to new-all time highs.

Such a feat would be a tremendous win for the bulls, as all-time highs have the the potential to produce a substantial amount of gains in a short amount of time. These gains can be attributed to the price action when the stock reaches a price it has never attained before. When the price hits a new all-time high, there is very little holding it back in terms of price resistance, and shares are free to surge higher.

Advertisement

The following stock chart illustrates the setup that can potentially send Commscope stock to new all-time highs.

comm

Chart courtesy of StockCharts.com

COMM stock has spent the last 16 months putting in a beautiful chart pattern. The pattern, highlighted in orange, is a bullish setup that is known to traders as a cup-and-handle formation. Traders use these setup patterns to identify continuation patterns that reaffirm the predominant trend. This pattern is completed when the price closes above the blue horizontal resistance line. These patterns are especially useful because, not only do they give traders a direction when the pattern completes, but a target price can also be generated.

The target price is obtained by taking the depth of the cup and extrapolating it above the horizontal resistance line. Using this method on the COMM stock chart gives a potential price objective of $46.00, and it represents a return of 40% from current levels.

The indicator in the lower panel labeled “MACD” is the moving average convergence/divergence, a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. This signal is currently bullish and this increases the odds that the bullish pattern will complete and send Commscope stock to new all-time highs.

The following Commscope stock chart illustrates how another momentum indicator reaffirms the bullish premise.

comm2

Chart courtesy of StockCharts.com

The 50-day moving average and the 200-day moving average can be used to generate a momentum indicator. There are only two possible signals that can be generated using this method. A golden cross indicates that a bull market is on the horizon, and a death cross indicates that a bear market is on the horizon.

The signal is confirmed when the faster moving average (50-day moving average) moves above or below the slower moving average (200-day moving average). The golden cross and death cross are exact opposites.

In November 2015, COMM stock generated a death cross and proceeded to sell off. In the months following this indicator, Commscope stock lost 30% before a bottom was finally established.

In May 2016, COMM stock generated a golden cross, and this signal is still intact. The tailwinds created by this signal should propel this investment higher. Couple this indicator with ones I outlined on the chart above, and I have the necessary pieces of information to produce a trading bias.

Bottom Line on Commscope Stock

I am bullish on COMM stock, and I believe that a bullish breakout is on the horizon that will send shares soaring to new all-time highs. My bias will remain bullish until the Commscope stock chart suggests otherwise.