EW Stock: The Predominant Trend Is Bullish
What happened to 2017? I miss that market environment where the indices inched up every single day and volatility was almost nonexistent. 2018 has been characterized by volatility, and it is becoming a roller coaster ride.
These large, gyrating moves can be unsettling, and that is why it is imperative to keep a cool head in such an environment. Keeping calm is not always an easy task to undertake, so I try not focus on the noise created by the daily swings, and I instead focus on the predominant trend.
I am focusing on U.S.-based medical equipment company Edwards Lifesciences Corp (NYSE:EW) stock because it has recently completed a technical price pattern, which is implying that the predominant trend is currently geared toward higher EW stock prices.
This completed pattern is highlighted on the following Edwards Lifesciences stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the EW stock chart is a “cup and handle” pattern. These price patterns are created because a significant level of price resistance prevented the stock price from advancing. This inability to advance created two distinct troughs, with the first being much larger than the second.
The significant level of price resistance that was responsible for creating the cup-and-handle pattern resided at $122.00, and it was first established in September 2016. So it’s appropriate that 16 months later, the pattern was finally completed when EW stock closed above resistance, with higher prices since prevailing.
To put things into context, since the cup-and-handle pattern was completed, Edwards Lifesciences stock has appreciated by 14.26%. The good news I have to share is that the bullish wave structure that preceded this pattern is suggesting that there are further gains to be made.
This bullish wave structure is highlighted on the following Edwards Lifesciences stock chart:
Chart courtesy of StockCharts.com
This EW stock chart has been annotated in order to highlight the wave structure that was responsible for creating the bullish trend, as well as the moving average convergence/divergence (MACD) indicator that has been supporting it.
This wave structure, which is constructive in nature, consists of impulse waves and consolidation waves. The waves highlighted in green are impulse waves, which define the period in a bullish trend when a stock stages a sustained move toward higher prices. These waves are advancing in nature and, as a result, these are the waves that I would prefer to capture.
The waves highlighted in purple are consolidation waves, and they define the period in a bullish trend when the stock price corrects and refrains from advancing. These waves are corrective in nature and, therefore, I prefer to avoid these waves if possible.
Just because I would prefer to avoid consolidation waves does not mean they are not important. On the contrary, consolidation waves are very important because they create the necessary conditions for a new advancing impulse to follow.
This Edwards Lifesciences stock chart illustrates that the cup-and-handle price pattern also doubles as consolidation wave, and its completion in January is suggesting that an impulse wave is still in development. What’s more, it suggests that higher EW stock prices are likely to prevail.
This notion of higher prices is being supported by the MACD indicator, which is a very influential momentum indicator.
MACD uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices, while a bearish momentum implies that a stock is geared toward lower prices. A stock cannot sustain a move in either direction unless the applicable momentum is supporting it.
In a bullish trend, impulse waves are accompanied by a bullish MACD cross, while consolidation waves are accompanied by a bearish MACD cross. The waves and the coinciding MACD signals on the EW stock chart are a testament to this notion.
A bullish MACD cross was just created in January and, as long as it remains in bullish alignment, it will imply that an impulse wave is in development. Therefore, higher Edwards Lifesciences stock prices are on the horizon.
I am bullish on Edwards Lifesciences stock because the indications on the company’s stock chart are suggesting that the stock is currently geared toward higher prices. I will maintain my bullish views on EW stock as long as the indications that created this view remain in bullish alignment.