DVAX Stock: Watching These Technical Indications
The Nasdaq composite index continues to forge new all-time highs, which is great news because it continues to reinforce the notion that a bull market is still in development.
This is in keeping with the theme of “not fighting the tape,” which suggests that if the indices are raging higher, as they are now, then it’s best to go with the flow and continue to look for investments that are setting up to make a move toward higher stock prices.
That is why I am currently focusing on Dynavax Technologies Corporation (NASDAQ:DVAX), a biopharmaceutical company.
More specifically, there is currently a technical price pattern developing on the Dynavax stock chart that will determine whether the next sustained move is toward either higher or lower DVAX stock prices.
Said price pattern is highlighted below:
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the DVAX stock chart is a price channel. A price channel is characterized by horizontal levels of both price resistance and support.
This price channel’s horizontal level of price support resides at $14.60, but what sets this pattern apart from other channels is that its price resistance is defined by a slightly downward-sloping trend line, which currently sits at $22.00.
Price channels contain a company’s stock prices, and Dynavax stock will remain trapped within this pattern until it is able to escape it, by breaking out of it.
Currently, support outlined by this channel is being tested, but I have the inclination to believe that this pattern will play out in a bullish manner by breaking above resistance.
My inclination is centered around the continuation gap that is highlighted on the above chart. This gap occurred on July 31, 2017, when DVAX stock opened higher, closing the day up 71.35%. This move was a result of the U.S. Food and Drug Administration (FDA) committee approving the company’s hepatitis B vaccination.
Continuation gaps mark important inflection points, suggesting that the trend currently in development has reached a midpoint. This information is very constructive because it is also suggesting that the price channel is doubling as a consolidation wave.
The implications of this are captured on the following Dynavax stock chart:
Chart courtesy of StockCharts.com
The wave highlighted in green is an impulse wave. It defines the period in a bullish trend when the stock sustains a progressive move toward higher prices.
The wave highlighted in purple is a consolidation wave. It shows the reverse: the period in a bullish trend when the stock corrects and refrains from advancing.
Impulse waves and consolidation waves work together, feeding off each other, producing the stair-step price action that is responsible for creating and sustaining a bullish trend.
As I mentioned earlier, the price channel doubles as a consolidation wave.
Consolidation waves play a very important part in the development of a bullish trend. They create the necessary environment where an advancing impulse wave can follow, suggesting that once the price channel is resolved, an impulse wave is likely next.
The development of impulse waves and consolidation waves has coincided with signals from the moving average convergence/divergence (MACD) indicator, which distinguishes between bullish and bearish momentum.
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 within the wave structure have coincided with MACD signals.
In January 2017, a bullish MACD cross was generated, coinciding with the development of an impulse wave; higher Dynavax stock prices came as a result.
In November 2017, a bearish MACD cross was generated alongside a consolidation wave. In turn, the DVAX stock price corrected and refrained from staging an advance.
If this pattern is to persist, then when a bullish MACD cross is generated, it will come along with a bullish resolution of the price channel.
I am watching Dynavax stock because I believe that it is setting up to make a move toward higher prices—a setup that will be complete once the technical price pattern is resolved and a bullish MACD signal is generated. When both occur, don’t be surprised if higher stock prices develop for Dynavax Technologies Corporation.