DHR Stock: Waiting for the Applicable Signals
I have good news. The markets are once again poised for higher values, which is not unexpected if you have been following my reports. I stood my ground earlier this year when the markets were under duress, stating that I didn’t see anything to suggest that the market sell-off was anything more than a much-needed correction.
Well, as it turns out, it was indeed a correction. That correction has now run its course and higher index values have once again prevailed. The move toward higher index values has been led by the small-cap stocks, which are speculative in nature. If speculation is still running rampant, it bodes well for the prospects of the markets going forward.
I am currently focusing on Danaher Corporation (NYSE:DHR) stock. I believe that Danaher stock is on the cusp of a bullish breakout, where higher DHR stock prices will follow.
These beliefs are centered around a very pristine and compelling technical price pattern that is currently in development on the company’s stock chart. The completion of this pattern will determine what happens next.
This technical price pattern is highlighted on the following Danaher stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the DHR stock chart is an ascending triangle. An ascending triangle is created when the price action is characterized by a static high and a sequence of higher lows.
Capturing this pattern was achieved by connecting the peaks and troughs that were created by this static high and sequence of higher lows. This method creates two converging trend lines that form this ascending triangle. The upper trend line identifies where resistance resides and the lower trend line identifies where support resides.
As long as Danaher stock is contained within these trend lines, the ascending triangle is still in development. The longer the triangle is in development, the more powerful the reaction will be once the pattern is complete.
The power generated by an ascending triangle is the result of traders identifying this pattern and positioning themselves on either side of support and resistance in anticipation of a possible breakout. The longer the pattern is in development, the more participants it attracts, which is directly related to the size of the reaction that follows.
In order to unleash the energy stored within this pattern, Danaher stock needs to complete the pattern. This will only be achieved when DHR stock either breaks above price resistance, which resides at $104.00, or falls below price support, which currently resides at $100.50.
Given the bullish posturing of the market indices, I have the inclination to believe that resistance will be broken. As a result, higher DHR stock prices will prevail.
My bullish beliefs will be confirmed when the indication highlighted on the following Danaher stock chart accompanies the break above resistance.
Chart courtesy of StockCharts.com
The indication I am referring to is a bullish signal from the moving average convergence/divergence (MACD) indicator.
MACD distinguishes whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is likely to appreciate, while bearish momentum implies that a stock is likely to depreciate.
This indicator is very influential because a stock cannot sustain a move in either direction unless the applicable momentum supports it, which is why the waves highlighted on the stock chart have coincided very nicely with this indicator.
These waves are responsible for creating and sustaining a bullish trend.
The wave highlighted in green is an impulse wave and it defines the period in a bullish trend when the stock sustains an uninterrupted move toward higher prices.
The wave highlighted in purple is a consolidation wave and it defines the period in a bullish trend when the stock corrects and refrains from advancing.
Consolidation waves are a very important part of every bullish trend because they create the necessary conditions where the next advancing impulse wave can follow. The ascending triangle doubles as a consolidation wave, and its completion will imply that an impulse wave is likely to follow. This notion that an impulse wave is in development will only be confirmed once a bullish MACD cross is generated.
A bullish MACD signal effectively confirmed that an impulse wave was in development in August 2017. A bearish MACD signal in February 2018 confirmed that the current consolidation wave was in development. Therefore, only when a bullish MACD signal is generated will I be convinced that higher DHR stock prices are in development.
Danaher stock is on the verge of generating a number of bullish technical indications. Once these indications are generated, I will have the necessary signals to believe that higher DHR stock prices are in development.