CRBP Stock: A Consolidation Wave Is in Development
It was last summer when I stumbled upon Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) stock, and boy was I glad when I did. This small-cap biotechnology stock had, and still contains, an exceptional-looking stock chart. The price action has been pristine and the indications have been spot on; anyone who wanted to use this collection of technical indicators to trade CRBP should have made off like a bandit.
Before I move forward with this publication, I need to clarify for those who have not been fortunate to frequent my work in the past. My views on an investment are solely based on my ability to discern and decipher the price action and indicators that are generated on the company’s stock chart. This method of investment analysis is what we call technical analysis, and I have been studying this artful skill for nearly two decades. I am intrigued by CRBP stock because it abides by rules set out by technical analysis.
For example, the following Corbus stock chart illustrates the price chart that first piqued my interest in this investment.
Chart courtesy of StockCharts.com
This CRBP stock chart has been annotated in order to highlight the price action and compilation of indicators that were responsible for generating a bullish view on this investment.
In 2016, a technical price pattern known as a double bottom pattern, was painted on the stock chart. This trend reversal pattern contains two consecutive lows that are separated by one single peak in between. When CRBP stock closed above the peak that separated these two bottoms, it completed the pattern. A completed double bottom is a trend reversal pattern that suggests that the bearish trend that preceded it is done doing its damage and a new bull market is now in development.
Not surprisingly, a new bull market did develop and it contained the quintessential characteristic that defines all bullish trends, which is a series of higher highs and higher lows. The stair-step pattern it creates is what constructive price action looks like.
Constructive price action consists of impulse waves and a consolidation waves. Impulse waves serve to define the period in a bullish trend where the stock price stages an advance, while a consolidation wave serves to define the period in a bullish trend where the stock price pulls back from its highs. Consolidation waves are very important because the pullback in the share price serves to alleviate overbought conditions, which is a necessary step so another advancing impulse waves can develop.
The Corbus stock chart is a perfect example of these waves feeding off each other in an alternating wave structure. This alternating wave structure creates a trend that is both orderly and sustainable.
The bullish trend has been supported by a golden cross that was generated in April 2016. A golden cross is a bullish indication that is generated when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). This indication is used to confirm that a bull market is in development.
It was this compilation of indications that suggested a bullish view was warranted, and this view was quickly vindicated. In the weeks that followed Corbus stock continued to make gains, and when all was said and done, it peaked at $10.78 before a correction ensued. This correction has been in development since October 2016, and one could argue that a very large consolidation wave is now in development.
The following Corbus stock chart illustrates the price action since the beginning of 2016 using a weekly scale.
Chart courtesy of StockCharts.com
Using the weekly scale on the CRBP stock chart serves to smooth the price action, and the number of impulse waves and consolidation waves are greatly diminished because the minutia of the trading action has contacted as every price bar now encompasses a week.
The smoothed price action helps illustrate that the correction that began in October of last year is a consolidation wave. Although the price action is unorthodox, it is still consistent with a consolidation wave. The peak in price that was forged in October still stands a significant level of resistance, and the correction low that immediately followed this peak still stands as a significant level of price support. CRBP stock has been trading in a range, bound by these levels, and it is creating the consolidation wave.
The resolution of the consolidation wave, which will occur when either support or resistance is broken, will determine whether further gains or further losses are on the horizon.
Analyst Take: Corbus pharmaceuticals stock is painting a picture on its stock chart that can be used to determine which direction the CRBP stock price will take next. A break above $10.78 would suggest that higher prices are on the horizon, while a break below $4.65 would suggest that lower prices are on the horizon. While this consolidation wave is in development, the best course of action is to stand aside and wait for the pattern to play out.