ENS Stock: Setting Up for Stardom
I am super excited to report my findings regarding EnerSys (NYSE:ENS) stock. Aside from being in a compelling sector like alternative energy sources, it produces industrial batteries that power many devices, both big and small. The resonance of Tesla Inc (NASDAQ:TSLA) is attracting hot money into this sector, but it is actually the ENS stock chart that is the source of my excitement. There is currently a price pattern that is in development, and a resolution to this price pattern will suggest that an impulsive move in price is set to ensue.
To clarify for anyone who hasn’t had the pleasure of of indulging in any of my work, I use technical analysis to generate my investment views. This method of investment analysis is based on the notion that historical price and volume data can be used to discern a price trend, as well as forecast future prices. This may seem like a silly notion, but this method has proven to be extremely effective and accurate on many occasions. I have been refining my skills in this method of analysis for nearly two decades and have become fairly confident in my ability to analyze a price chart.
The following price chart illustrates the indicator and technical price pattern that are suggesting that a bullish view on EnerSys stock is warranted.
Chart courtesy of StockCharts.com
The bullish price action off the 2013 lows can be best described as constructive price action. Constructive price actions consists of a two-wave structure.
The first wave of this two-wave structure is an impulse wave, and it is highlighted in green on the price chart above. The function of an impulse wave is to advance price. This wave is characterized by a linear acceleration of price.
The second wave of this two-wave structure is a consolidation wave, and it is highlighted in purple on the price chart above. The function of the consolidation wave is to unwind any overbought conditions that were created during the impulse wave, and more importantly, set up the next advancing impulse wave. This wave acts as a midpoint and it is characterized by its sideways chopping trading action.
In November 2016, following the presidential election, a massive equity rally ensued. This rally caused EnerSys stock to exit the consolidation wave. This consolidation wave was in development for approximately three years, and breaking above it is a strong bullish indication. The completion of this consolidation wave indicates that a new impulse wave is now in development.
The moving average convergence/divergence (MACD) indicator in the lower panel of the price chart has been extremely effective in confirming the direction of the predominant wave. MACD is a simple trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
In June, 2014 a bearish MACD cross was generated, indicating that bearish momentum was influencing ENS stock. As a result, the path of least resistance was geared towards higher prices. This indicator effectively confirmed that the impulse waves had concluded and that a consolidation wave was in development.
In July 2016, a bullish MACD cross was generated, indicating that bullish momentum was now influencing EnerSys stock. As a result, the path of least resistance was geared towards higher prices. This indicator suggested that a conclusion to the consolidation wave was near, and that a new impulse wave was set to develop.
The constructive price action and the MACD indicator both suggest and confirm the notion that an impulse wave is set to develop and higher prices are likely.
After the initial surge out of the consolidation wave, the share price has failed to make a new high, but the price action has remained constructive. This constructive price action is illustrated on the EnerSys stock chart below.
Chart courtesy of StockCharts.com
The price chart above also illustrates constructive price action but on a much smaller scale.
I am currently watching the consolidation wave that is in development, awaiting a resolution to the pattern. This consolidation wave has developed as a descending channel. A descending channel is created using two parallel downward-sloping trend lines. Since early December 2016, ENS stock has been oscillating within this channel.
When price finally exits this channel, it will indicate that the consolidation wave is complete, and a new impulse wave is set to develop. Such a feat would equate to a double buy signal as the larger bullish picture is also suggesting that an impulse wave is set to develop. When price exits this consolidation wave, I expect an impressive run to the upside to follow.
Bottom Line on EnerSys Stock
I am bullish on EnerSys stock, awaiting the completion of a secondary consolidation wave. The completion of this wave will suggest that much higher prices are likely to follow. This constructive bullish view was generated using the ENS stock chart. I will remain bullish on this investment until there are indications on the price chart that suggest another view is warranted.