FFIV Stock: Wickedly Bullish
In my line of work, when it comes to trading, I am either bullish or bearish on a potential investment, and this comes down to either liking or not liking what I see. I like what I see when it comes to F5 Networks Inc. (NASDAQ:FFIV) stock, and this is because it contains certain attributes that I look for in a potential investment. These attributes that I seek are found on the stock chart, or are generated using one.
This method of investment analysis is known as technical analysis, and it is based on the notion that historical price and volume data can be used to discern trends and forecast futures prices. I have been refining my craft using this method for nearly two decades, and it has become the basis of my trading strategies.
The F5 Networks stock chart is a thing of beauty and I fell in love with it the first time I laid eyes on it; to say I like this investment is an understatement. My admiration for this investment is apparent on many levels.
The following FFIV stock chart illustrates the main reason why I am so enamored with this investment.
Chart courtesy of StockCharts.com
The F5 Networks price chart above is an incredible example of constructive price action that took many years to develop.
Constructive price action contains impulse waves (highlighted in green) and consolidation waves (highlighted in purple). The impulse waves serve to advance price, and the consolidation waves serve to alleviate overbought conditions and set up the next advancing impulse wave. This wave structure is so instrumental in defining the next direction in price that I purposely seek out consolidation waves when I look for a potential investment.
The size of this wave structure is enormous and it only adds to my level of infatuation with this investment. The consolidation pattern has been in development since late 2011. The size of a pattern is directly related to the reaction that can be expected. Larger and longer patterns are expected to have longer and larger reactions. F5 Networks stock completed the consolidation wave late last year by exiting it in upward direction. This event is highlighted as a “breakout” on the chart above. This breakout serves to suggest that a new impulse wave is now in development.
The bullish development is supported by the moving average convergence/divergence (MACD) indicator located in the lower panel. MACD is simple trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. A bullish cross was generated in August 2016, which indicates that bullish momentum is now propelling FFIV stock, and as a result, the path of least resistance is geared towards higher prices.
The wave structure not only suggests the next direction price is going to take, but it also can be used to generate a potential price objective. This price objective is based on the theory surrounding these waves. The theory states that impulse waves that are separated by a consolidation wave tend to mirror each other in terms of length, and the consolidation wave acts as a midpoint. Applying this theory to the wave structure above produces a potential price objective of $190.00.
Best of all, this wave structure allows me to identify my level of risk. If price falls back within the consolidation pattern, it will indicate that the bullish wave structure is failing, and I will have all the reason I need to abandon my bullish view, because a bearish view will be warranted.
Similar price action is seen on the daily chart and it is illustrated on the F5 Networks stock chart below.
Chart courtesy of StockCharts.com
Similar constructive price action is contained on the price chart above and it illustrates that this type of price action is consistent within a bullish trend. This bullish price action supports the view that higher prices will prevail because it supports the view that the impulse wave suggested by the longer-term chart is in development.
The bullish indications do not end there, as a golden cross was generated in June 2016. A golden cross is a bullish indicator that is generated when the 50-day moving average (highlighted in blue) crosses above the slower 200-day moving average (highlighted in red). Traders use this signal to confirm a bull market is in development, and I have found it wise to tilt my strategies in the direction suggested by this indicator.
Bottom Line on F5 Networks Stock
F5 Networks stock has completed a very large technical pattern that is pointing to much higher prices. As a result of this completed technical pattern, I am bullish on FFIV stock, and will continue to maintain a bullish view until the price chart gives me reason to believe another view is warranted.