EXAS Stock: Technicals Are in Bullish Alignment
Trade wars, financial crises, terrorism, and tensions in the Middle East. These are the headlines that strike fear in people. As a result, they have a tendency to scare off investors.
The problem with this notion is that, when it comes to investing, our emotions have rarely—if ever—resulted in making the correct move.
This is why I try my best to remove my emotions from investment decisions. I do this by basing my views on the health of the market and by basing my decisions on price action.
For instance, I am currently bullish on the prospect of the markets and believe that higher index values are likely. This notion was just recently reinforced by the Russell 2000 index. The Russell 2000 is a small-cap index, and it has just recently forged a new all-time high.
Small-cap stocks are speculative in nature. If this large subgroup of markets is pushing higher, it bodes well for the prospects of the markets, suggesting that the bull market in stocks is alive and well.
Sticking with this theme of higher prices, I believe that EXACT Sciences Corporation (NASDAQ:EXAS) stock is poised to surprise us to the upside.
This bullish view of EXAS stock is based on a technical price pattern, which was just recently completed.
This completed technical price pattern is highlighted on the following EXACT Sciences stock chart.
Chart courtesy of StockCharts.com
This EXAS stock chart highlights a technical price pattern known as a cup and handle.
Cup and handle price patterns are created when a significant level of price resistance prevents a stock price from moving beyond it.
This inability to advance creates two distinct troughs on the stock chart. In a cup and handle pattern, the first trough is always bigger than the second. As you can see on the above EXAS stock chart, these troughs create a picture that resembles a teacup with its handle.
The significant level of price resistance that was responsible for creating this pattern for EXACT Sciences stock resided at $53.75. On May 30, the stock price surged higher by 11.12%, closing the day at $58.58. This surge left zero doubts that resistance was finally broken.
This price surge, which completed the cup and handle price pattern, implies that higher stock prices are likely to follow. If you’re wondering why, the simple reason—which is always the best one—is that resistance has finally been broken, leaving EXAS stock free to appreciate.
EXAS stock is now challenging its all-time high. This level may act as a level of price resistance, but I have reason to believe that this move toward higher prices is just in its infancy.
This belief is based on the notion that the cup and handle price pattern was an instrumental piece of the wave structure that has been responsible for sustaining a bullish trend in EXACT Sciences stock.
This wave structure is highlighted on the following EXAS stock chart.
Chart courtesy of StockCharts.com
This chart highlights the wave structure that has been responsible for sustaining a bull market in EXACT Sciences stock.
The waves highlighted in green on the above chart are impulse waves. These waves are advancing in nature and, as a result, they capture the stage in a bullish trend when a stock makes a sustained move toward higher prices.
The waves highlighted in purple are consolidation waves. These waves are corrective in nature and they capture the stage in a bullish trend when the stock price corrects and refrains from advancing.
These waves feed off each other, creating higher highs and higher lows, which is the quintessential characteristic that defines a bullish trend.
The completion of the cup and handle price pattern also completed the consolidation wave that was in development.
These events suggest that a new advancing impulse wave is currently in development, reinforcing the bullish trend and suggesting that further gains are on the horizon.
This notion of higher prices and further gains is being supported by the moving average convergence/divergence (MACD) indicator.
MACD is a trend-following 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. Bullish momentum implies that a stock is likely to advance, while bearish momentum implies that a stock is likely to decline.
Momentum is a very powerful force, and a sustained move in either direction cannot occur unless the applicable level of momentum is supporting it. This is why the MACD indicator is such an influential tool.
Every impulse wave highlighted on the EXACT Sciences stock chart has coincided with a bullish MACD cross. A similar thing can be said about the consolidation waves, because they have coincided with a bearish MACD cross.
The bullish MACD cross, coupled with the other indications, is suggesting that EXACT Sciences stock is now primed for further gains.
I am bullish on the EXACT Sciences stock because a number of indications are currently implying that EXAS stock is geared toward higher prices, suggesting that a bullish view is warranted.