Cypress Semiconductor Stock Is Inches Away From Breaking Out

Cypress Semiconductor stock
iStock.com/denphumi

CY Stock: Anticipating a Bullish Breakout

We are in the thick of the summer doldrums. Even though it is supposed to be a lackluster market, there is still much excitement in the air because earnings season is now in full effect.

On balance, earnings have been quite good, and I am not ashamed to say that the Trump tax cuts have a lot to do with it.

The market moves that are currently developing are determined by how investors perceive earnings on any given day. This makes for an exciting market.

I have to admit that the current market has me a little on edge because two market darlings—Netflix, Inc. (NASDAQ:NFLX) and Facebook, Inc. (NASDAQ:FB)—missed expectations on their earnings reports. This news sent their stock prices tumbling lower.

These two stocks, in particular, carry significant weight in many indexes and exchange-traded funds (ETFs), and I am worried that this may be the beginning of worse things to come.

Whether the market trades lower on this development remains to be seen, so, instead of dwelling on what may or may not be, I am putting my emotions aside. I am now focusing on Cypress Semiconductor Corporation (NASDAQ:CY) stock because I believe it is on the verge of breaking out toward much higher prices.

These beliefs are based on the fact that Cypress Semiconductor stock is currently testing a significant level of price resistance.

Before I outline this level of price resistance, I want to highlight the signals that have been supporting the bullish advance in CY stock.

These signals are highlighted on the following chart.

Chart courtesy of StockCharts.com

This stock chart captures a bullish trend that began in February 2016. This bullish trend contains the characteristic that defines all bullish trends, which is a series of higher highs and higher lows. This price action creates the staircase price action that bullish trends are so famous for.

I captured this bullish trend on the above chart by connecting the troughs that were created by the price action that characterized the bullish trend. The end result was an uptrend line.

Uptrend Line

The uptrend line is a simple yet effective tool. It not only captures the bullish trend, but also acts as a dividing line separating Cypress Semiconductor stock from its bullish trend and a potential bearish one.

In essence, the uptrend line acts a significant level of price support. As long as CY stock is trading above it, I can only assume that the bullish trend that began in February 2016 is intact and that, therefore, higher prices are likely to prevail. Breaking below this uptrend line would negate all bullish assumptions.

This bullish trend has been supported by a golden cross, which was generated in May 2016.

Golden Cross

A golden cross is generated when the faster 50-day moving average, highlighted in blue on the above chart, crosses above the slower 200-day moving average, highlighted in red. This creates a bullish signal.

True to its nature, after the golden cross was generated, higher prices via a bullish trend have prevailed. This signal has been in bullish alignment for over two years. As long as it remains so, it will continue to support the notion that a bull market is in development.

I have put so much emphasis on this bullish trend because CY stock is currently testing a very important and significant level of price resistance.

This significant level of price resistance is highlighted on the following Cypress Semiconductor stock chart.

Charts courtesy of StockCharts.com

This CY stock chart highlights a significant level of price resistance which resides at $18.50. This level of price resistance was first established in February 2011. For the last seven-and-a-half years, Cypress Semiconductor shares have been trading below it.

Not only is this a significant level of price resistance, but it is the last level of price resistance. This means that, if the stock ever manages to break above the resistance level, there won’t be anything left to prevent the stock price from advancing. This would essentially open the door for sky-high prices.

As long as the bullish trend remains intact, it supports the notion that resistance will eventually fall and that higher stock prices will prevail.

Analyst Take

Cypress Semiconductor stock is currently testing a significant level of price resistance. Breaking above it will open the door to much higher stock prices.

The bullish trend that has advanced the CY stock price shows no signs of abating, which suggests that resistance is likely to fall in the not-too-distant future.