CUDA Stock: Picture Perfect
Internet security is becoming a serious growing concern. There have been allegations of election tampering and stories breaking that web sites have been broken into and sensitive information has been taken from them. In an era when security needs to be addressed, it makes fundamental sense to look at investments like Barracuda Networks Inc (NYSE:CUDA) stock.
As an analyst who uses price charts to generate his investment views, the CUDA stock chart is compelling, and there are indications that Barracuda stock is setting up to make a move. The action on the price chart is supporting the fundamental view that Internet data security is an attractive investment.
To clarify for anyone who has not had the pleasure of reading my previous writing, I use technical analysis to generate my views on a potential investment. This method of analysis is based on the notion that historical price and volume data can be used to discern a trend and forecast future prices. This is not a silly notion, I assure you. I have been using this method to create investment strategies for close to two decades, and I have become proficient in analyzing a stock chart.
The following Barracuda stock chart illustrates the compelling picture which suggests that the path of least resistance for CUDA stock is geared toward higher prices.
Chart courtesy of StockCharts.com
A bullish trend began in January 2016, and it contains the quintessential characteristic of higher highs and higher lows. This characteristic creates a price chart that begins in the lower left and ends in the upper right.
This bullish trend is best defined by using a simple uptrend line, which is created by connecting the troughs on the price chart. This uptrend line is as easy to use as it is to create. If CUDA stock is trading above this trend line, it is a bullish indication. If the stock is trading below that line, it is a bearish indication. As a result, this trend line has become an important level of price support and, as long as Barracuda shares are trading above this uptrend line, I can only assume that higher prices will prevail.
This uptrend was reinforced in July 2015, when a golden cross was generated. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this indicator to suggest that a bull market is in development. This suggestion is a result of an acceleration in momentum that caused the average price over the last 50 days to cross above the average price over the last 200 days. This is an indication that bullish momentum is propelling CUDA shares higher.
It is worth noting that both the uptrend line and the 200-day moving average have converged. This serves to suggest that support at this level is strong because two different metrics are supporting it.
The following Barracuda stock chart illustrates the price action that has occurred above the uptrend line, and the developments that suggest that the stock is setting up to move.
Chart courtesy of StockCharts.com
The price action above the uptrend line has been extremely constructive. Constructive price action consists of a two-wave structure: an impulse wave that is highlighted in green and a consolidation wave that is highlighted in purple.
These waves are the building blocks of a sustainable trend. The impulse wave serves to advance the price, and the consolidation wave serves to alleviate overbought conditions and set up the next advancing impulse wave. When I scan for a potential investment, I specifically focus on finding consolidation waves, because, upon completion, it will suggest the next direction that shares will trend in.
The current consolidation wave that is in development is setting up as a symmetrical triangle. Symmetrical triangles are my favorite technical price pattern because they are particularly explosive once that pattern is completed. A symmetrical triangle price pattern is created by using two converging trend lines. The upper trend line represents resistance and the lower trend line represents support.
As the pattern develops, the range between support and resistance begins to contract, and this causes momentum to build within the pattern. This built-up momentum is finally released when the pattern is complete and the price exits the pattern.
Support outlined by the symmetrical triangle also coincides with the uptrend line, and the 200-day moving average. This reinforces the notion that support at this price level is very strong, and the likely resolution of consolidation waves is tilted to the upside.
A resolution to the consolidation will not only dictate the next direction that CUDA stock will take, but it will also provide a potential price objective. This price objective is created by using the theory behind constructive price action that impulse waves separated by consolidation waves tend to mirror each other in terms of length. If I apply this theory to price action above, it produces a potential price objective of $33.00.
Bottom Line on Barracuda Stock
I am completely enamored with Barracuda stock because the price chart continues to suggest that higher prices are a likely endeavor. This bullish view was generated using the CUDA stock chart, and therefore, I will remain bullish on this investment until there are indications on the price chart that warrant a different view.