DNR Stock: Signals Are in Bullish Alignment
The wild trading action continues, and while these gyrating moves in the markets are good for traders, they can be really unnerving for passive investors.
Markets that are characterized with elevated levels of volatility, like they are now, are transitional in nature. If the market is going to regain its footing in the near future, it will do so with a new leadership group.
Yes, these markets can be unnerving, but, until there are indications suggesting otherwise, I will still be in the camp that believes that volatility will subside and the market will once again fixate on making a move toward higher values.
So it should not be the least bit surprising that I continue to look for investments that are geared for higher stock prices.
I am currently focusing on Denbury Resources Inc. (NYSE:DNR) because I have the inclination to believe that Denbury Resources stock is geared for higher prices. My beliefs are centered around a number of technical indications that have been generated on the stock chart.
The first series of technical indications is highlighted on the following DNR stock chart.
Chart courtesy of StockCharts.com
In late December 2017, a golden cross was generated on the DNR stock chart. A golden cross marks the event when the faster 50-day moving average, highlighted in blue, crosses above the slower 200-day moving average, highlighted in red. Traders use this event as a signal to suggest that a bull market is in development.
The technical price pattern that followed the golden cross is a cup and handle pattern. This pattern is identified by its two troughs, where the first trough is much bigger than the second. These troughs were created as a result of a significant level of price resistance that prevented the stock price from advancing.
On March 21, 2018, Denbury Resources stock closed above resistance, completing the cup and handle price pattern. The completed pattern is suggesting that higher DNR stock prices are on the horizon.
The fact that the cup and handle pattern was created and completed shortly after the golden cross was generated only serves to reinforce the implications suggested by it.
The second series of technical indications supporting the notion of higher DNR stock prices was generated last year, and they are highlighted on the following Denbury Resources stock chart.
Chart courtesy of StockCharts.com
In mid-July, the moving average convergence/divergence (MACD) indicator generated a bullish cross.
This was a significant event because 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.
A bullish MACD signal implies that a stock is geared toward higher prices, while a bearish cross implies that a stock is geared toward lower prices. This information is significant because a stock cannot stage an advance or a decline without the applicable momentum supporting it.
As long as the MACD indicator remains in bullish alignment, higher prices are still in development.
A few months after the bullish MACD cross was generated, the price action on the DNR stock chart began making a stair-step pattern, which was characterized by a series of higher highs and higher lows, which is the quintessential characteristic that defines all bullish trends.
This bullish trend was captured on the Denbury Resources stock chart using a simple uptrend line that was created by connecting the series of higher lows.
This uptrend line defines the bullish trend, as well as identifies where price support can be found. As a result, as long as DNR stock continues to trade above the uptrend line, I can only assume that the bullish trend remains in development.
Let’s not forget that this bullish trend has been accompanied by a bullish MACD cross and a golden cross. As long as these signals remain in bullish alignment and the price action is characterized by higher highs and higher lows, this bullish trend will still be intact and higher Denbury Resources stock prices should prevail.
I am bullish on Denbury Resources stock because a number of technical indications are suggesting that DNR stock is currently geared toward higher prices. I will maintain a bullish view on this investment for as long as the indications that were responsible for generating it remain in bullish alignment.