This Pattern on the GLW Stock Chart Implies Further Gains

Corning stock
credits:istock.com/denphumi

GLW Stock: The Path of Least Resistance Is Toward Higher Prices

Since I initiated my bullish view on Corning Incorporated (NYSE: GLW) stock in January 2017, it is up 22.56%. The rationale responsible for generating this bullish view on Corning stock was published in a report titled “Corning Incorporated: GLW Stock Is Taking Off.”

I am returning to provide an update on Corning stock because there have been certain developments that need to be addressed.

These developments are all technical in nature and, therefore, they have been derived using a method of investment analysis known as technical analysis. This method of investment analysis uses price and volume indicators to determine which direction a stock is heading in. I have spent the better part of two decades dedicating myself to understanding and applying this method of analysis, and I feel that I’m well-suited to take on this task.

My interest in this investment was piqued by a completed technical price pattern on the GLW stock chart, which is currently suggesting that further gains are on the horizon. This technical price pattern is highlighted on the following Corning stock chart.

Corning stock chart

Chart courtesy of StockCharts.com

The pattern highlighted on the stock chart is a cup and handle price pattern.

The pattern develops because a significant level of price resistance acts a like a barrier that prevents the stock price from advancing. This level of price resistance causes two distinct troughs to form, where the first is much larger than the second. These troughs give this pattern its distinct shape, which is why it’s called a cup and handle pattern.

This cup and handle pattern was completed on November 28, when this stock closed above $32.20. It is now suggesting that higher Corning stock prices are on the horizon. The great thing about this pattern is that aside from just suggesting that higher prices are in development, the pattern can also be used to generate a price objective that can be an applied to a trading strategy.

This price objective is obtained using a method called a measured move, which involves taking the depth of the cup and projecting that value above the level of resistance that defined the pattern. Applying this method produces a potential price objective of $36.50.

Cup and handle patterns are continuation patterns. A continuation pattern implies the trend has reached a temporary plateau and that once the pattern is complete, the predominant trend will reassert itself. Now that I have established that this continuation pattern is complete, it is wise to examine the trend that preceded it to determine what the upcoming trend will be.

The following Corning stock chart illustrates the bullish trend that preceded the cup and handle continuation pattern.

GLW stock chart

Chart courtesy of StockCharts.com

This GLW stock chart illustrates the bullish trend that was established in August 2015.

It is characterized by a series of higher highs and higher lows, which is the quintessential characteristic that creates and sustains a bullish trend. This bullish trend was confirmed shortly after it began its development in March 2016, when a golden cross was generated.

A golden cross is a bullish indication suggesting that a bull market is in development. It is created when the faster 50-day moving average crosses above the slower 200-day moving average.

This bullish indication has been engaged for 21 months and GLW stock has been consistently trading above both these moving averages. As a result, the moving averages responsible for generating the golden cross have remained in bullish alignment, suggesting that the bullish trend is healthy and anticipated to continue.

Couple this indication with the continuation pattern that was just completed, and it reaffirms the notion that higher Corning stock prices can be expected in the near future.

Analyst Take:

I am focusing on Corning stock because a technical pattern was just completed that reaffirms my bullish view established in January 2017. This pattern suggests that the bullish trend that began in August 2015 is still in development and therefore higher GLW stock prices can be expected.