Waiting for a Resolution on the TIVO Stock Chart
Something very interesting is occurring on the TiVo Corp (NASDAQ:TIVO) stock chart, and it has definitively piqued my interest. This interesting dynamic I am referring to is a particular technical price pattern that is currently developing on the TIVO stock chart.
This price pattern is particularly explosive, and when this pattern is finally resolved, a large move is expected to occur. The price moves coming out of this pattern are swift and abrupt. If you blink, you might just miss it. Being ready for an outcome is always the best course of action.
The particular price pattern that is highlighted on the below stock chart is an inverted “head and shoulders” pattern. This pattern is known to mark the transition where a bearish trend becomes a bullish one. The head and shoulders pattern is created as a result of the stock price being prevented from advancing past a significant level of resistance.
This head and shoulders pattern consists of three troughs and a neckline. The second trough, the head, is the largest. The first and third troughs, the shoulders, are usually of equal size. The neckline is defined by the significant level of price resistance that suppressed the stock from moving beyond it. This pattern is finally completed when it breaks above the neckline, shattering the level of resistance that has contained it.
Chart courtesy of StockCharts.com
The current pattern has been in development for a little over three years. The duration that a pattern spends in development directly relates to the size and scope of the reaction that can be expected once the pattern is finally resolved. Three years is quite a long time to be caught within a directionless pattern.
If TiVo shares can muster enough strength to close above the neckline, I expect a swift and abrupt move to follow. The good thing about this type of price pattern analysis is that it can be used to project what the swift and abrupt move might look like.
Once the pattern is completed, it can be used to project a price objective. This objective is obtained by taking the depth of the head and extrapolating that value above the neckline. If I assume that the head and shoulders pattern is resolved when the pattern closes above $22.00, it will produce a potential price objective of $38.00. This potential price objective represents a 73.73% return, which can be used as the anchor to generate an appropriate investment strategy.
This pattern is contingent on two factors. The first factor is that the stock price must close above the neckline in order to confirm the bullish implications suggested by this pattern. The second factor is that, if the stock price closes below $15.00, this would negate the pattern and all the implications suggested by it. The best course of action is to wait for a resolution before acting.
In order to complete the head and shoulders price pattern, the stock price will need appreciate. In order to do that, TiVo stock will need to leap over a significant hurdle.
Chart courtesy of StockCharts.com
This hurdle I am referring to is the 200-day moving average, and it is effectively highlighted on the stock chart above.
The 200-day moving average acts as a line in the sand that is used to distinguish between healthy investments in a bull market, and unhealthy investments in a bear market.
This distinction between the two is very easy to grasp, and simply trading above the 200-day moving average suggests that an investment is in a bull market and that higher prices are like to follow. Trading below the 200-day moving average suggests that an investment is in a bear market and that lower prices are likely to follow.
Currently, TiVo stock is trading below the 200-day moving average, so this puts a slight damper on the prospects of this investment going forward. In order to change this dynamic, the shares will need to appreciate by a marginal amount because the stock price is currently testing this level.
Bottom Line on TiVo Corp
There is a very large technical price pattern currently in development on the TIVO stock chart. Once this pattern is completed, it will carry implications suggesting that the stock price is set to appreciate. I would wait for the completion of this pattern, which requires the stock price to close above the neckline that defines this pattern.