FFIV Stock: Waiting for a Sustained Close Above Resistance
When it comes to trading, I prefer a disciplined and patient approach. To instill discipline and patience, I like to find investments that are set up to make a move, so I can add them to my watch list where I can wait till they give me the necessary indications suggesting that they are primed for a move toward higher or lower prices.
I am focusing on F5 Networks, Inc. (NASDAQ:FFIV) stock because it fulfills this criterion. I have been waiting for an indication suggesting higher F5 Networks stock prices for what feels like an eternity, and my patience is growing thin, which means such an event could likely be just around the corner.
The indication I am looking for is a break above a significant level of price resistance, which is highlighted on the following FFIV stock chart.
Chart courtesy of StockCharts.com
This FFIV stock chart illustrates that a stubborn and significant level of price resistance resides at $149.00. This level was first established in January 2011 and, for the last seven years, the FFIV stock price has been contained beneath it. Every attempt to move beyond it has been defeated.
I can’t recall ever seeing a level of resistance that has been in force for so long, but what I do know for sure is that this level is very significant and it is all that is standing in the way of higher F5 Networks stock prices.
I am speculating that one day, this level of resistance will be broken. That opportunity looks like it is about to present itself. The moving average convergence/divergence (MACD) indicator is lining up to suggest that higher prices are on the horizon.
To clarify, MACD is a simple trend-following momentum indicator that uses the crossing of a signal line to distinguish between bullish and bearish momentum. Momentum is what influences a stock’s price and in order to stage a move toward higher prices, bullish momentum is required.
In January 2014 and June 2016, a monthly bullish MACD cross was generated and, as the indicator suggested, higher FFIV stock prices prevailed. The MACD indicator is currently converging and a bullish cross is likely to be generated in the months ahead, which will once again suggest higher stock prices are likely.
Given F5 Network’s stock proximity to the significant level of resistance, this bullish MACD signal increases the odds that it will breach this level. In doing so, FFIV stock will finally be free to appreciate and much higher stock prices will follow.
The anticipation of much higher stock prices following a breach of resistance is based on the following F5 Networks stock chart, which is constructive in nature.
Chart courtesy of StockCharts.com
The FFIV stock is a prime example of constructive price action, consisting of an impulse wave and a consolidation wave.
The impulse wave (highlighted in green) is advancing in nature and this wave defines the stage in a bullish trend where a stock makes a sustained move toward higher prices.
The consolidation wave (highlighted in purple) is corrective in nature, and this wave serves to alleviate overbought conditions, which creates the necessary environment where an advancing impulse wave will follow.
These waves work together to create and sustain a trend.
The significant level of price resistance is defined as a very large consolidation wave and once resistance is broken, an impulse wave is excepted to follow.
The size of the consolidation wave is important and it directly relates to the reaction that can be expected once resistance is finally broken. Large consolidation waves are expected to generate powerful reactions and this one is exceptionally large.
So aside from just suggesting that higher prices are in development once the consolidation wave is complete, this wave structure can be used to quantify this size of the reaction by suggesting a potential price objective for the impulse wave in development.
This price objective for F5 Networks is based on the theory surrounding this wave structure, which states that impulse waves separated by a consolidation wave tend to mirror each other in terms of length, where the consolidation wave acts as a midpoint. Applying this theory to the wave structure above produces a potential price objective of $190.00, once resistance is broken and the consolidation wave is complete.
F5 Networks stock has created a very large technical pattern that, upon completion, will imply that much higher prices are on the horizon. Until this technical price pattern is complete, I will maintain a neutral stance on FFIV stock, waiting for a break above resistance.