CRSP Stock: Path of Least Resistance Is Toward Higher Prices
If you haven’t noticed, there has been a standout sector that has been holding its own even through the violent downturn that sent chills down the spines of unsuspecting investors.
That sector is the biotechnology sector, and some of the most exciting stocks with the most compelling stock charts currently reside within it. This is great news for traders and investors because sector-wide moves are very powerful and produce extraordinary results.
In my search for a compelling investment, I have come across Crispr Therapeutics AG (NASDAQ:CRSP) stock. CRSP stock is obviously a biotechnology stock and it has been turning heads with its performance as of late. It has appreciated to the tune of 158.62% since the middle of December 2017.
Crispr Therapeutics stock contains price action on its stock chart that is quite remarkable, and I would go as far as to say that this price action is responsible for the stratospheric move toward higher prices that began in December.
The following stock chart illustrates the price action that I believe was responsible for that stellar move that began in mid-December.
Chart courtesy of StockCharts.com
The pattern highlighted on the CRSP stock chart is a symmetrical triangle.
This pattern develops when the price action is characterized by a sequence of lower highs and higher lows. Connecting the sequence of highs creates a trend line that represents price resistance, and connecting the sequence of lows creates a trend line that represents price support.
These trend lines are converging in nature, and they create the triangle shape that defines this pattern. I am really fond of triangle patterns because they are known for their explosive breakouts. The convergence between price support and price resistance creates a dynamic in which a break above resistance or below support is inevitable.
The power generated by this pattern is a result of traders positioning themselves in anticipation of which direction the pattern is likely to get resolved in.
In this instance, CRSP stock completed the triangle pattern by breaking above the trend line that represented resistance, and the following stock chart illustrates the explosive move that followed.
Chart courtesy of StockCharts.com
At first glance, it is not hard to see why I am so enamored with triangle patterns. After the pattern was completed, Crispr Therapeutics stock appreciated to the tune of 122.22% in as little as seven weeks.
I have taken the CRSP stock chart one step further and annotated the wave structure that created constructive price action, as well as highlighting a key momentum indicator, the moving average convergence/divergence (MACD) indicator. I believe that these indications are currently suggesting that CRISPR stock has further upside potential.
Constructive Price Action
Constructive price action consists of two predominant waves, which are responsible for creating and sustaining a trend.
The wave highlighted in green is an impulse wave, and this wave captures the period in a bullish trend where the stock stages a sustained move toward higher prices.
The wave highlighted in purple is a consolidation wave, which captures the period in a bullish trend when overbought conditions are unwound. As a result, this wave is characterized by its corrective price action. Consolidation waves are very important because they create the necessary conditions for an impulse wave to follow.
On February 26, CRSP stock broke out of the consolidation wave, which is currently suggesting that an impulse wave is now in development. This notion is being supported by the MACD indicator.
MACD is a momentum indicator that uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum creates a path of least resistance toward higher prices, while bearish momentum creates a path of least resistance toward lower prices.
MACD is a very influential indicator because a stock cannot stage a sustained move in either direction unless the applicable momentum is supporting it. So as a result, it is not a coincidence that the wave structure responsible for creating constructive prices action coincides with the MACD indicator.
For example, in December 2017, a bullish MACD cross was generated, suggesting that higher CRSP stock prices were likely to come. As expected, an impulse wave followed.
In February 2018, the bullish MACD cross gave way to a bearish MACD cross, suggesting that lower prices were likely to prevail. A consolidation wave developed as a result.
That bearish signal did not last long because a new bullish MACD cross was just generated, suggesting that higher Crispr Therapeutics stock prices are now likely to prevail. This coincides with the wave structure suggesting that an impulse wave is now in development.
I am bullish on Crispr Therapeutics stock because there are coinciding indications generated by price action and the MACD indicator, suggesting that higher CRSP stock prices are still in development.