FFIV Stock: Resistance Is Finally Broken
The stock market backdrop hasn’t changed in recent weeks, as volatility remains elevated and investors remain skittish. Elevated levels of volatility aren’t conducive to markets that are set to appreciate in value, but don’t let that fool you; it doesn’t mean there are no stocks setting up to make moves toward higher prices.
As a matter of fact, in such an environment, there are only a handful of stocks staging an advance on any given day. So, that makes finding compelling investments a tad bit easier.
For instance, I have been watching F5 Networks, Inc. (NASDAQ:FFIV) for a number of months now and, finally on April 13, FFIV stock gapped higher and closed above a very significant level of price resistance. This event suggests that F5 Networks stock is likely to appreciate.
This significant level of price resistance is highlighted on the following F5 Networks stock chart.
Chart courtesy of StockCharts.com
This FFIV stock chart highlights a significant level of price resistance, at $149.00, which was first established in January 2011. Which means, for the past seven years, this level of price resistance has been responsible for preventing F5 Networks stock from advancing.
This level of price resistance was all that stood in the way of higher prices for F5 Networks shares. I am pleased to say that, on April 13, FFIV gapped higher and finally closed above this significant level of price resistance.
Higher F5 Networks stock prices are now likely to prevail, because there isn’t a new level of price resistance to prevent the stock price from advancing.
This break above resistance really was not a surprise, because I have been anticipating such an outcome ever since the moving average convergence/divergence (MACD) indicator generated a bullish signal, suggesting that higher price were likely.
MACD is an influential momentum indicator that uses the crossing of a signal line to distinguish whether bullish or bearish momentum is influencing a stock. Bullish momentum implies that a stock is geared toward higher stock prices, while bearish momentum implies that a stock is geared toward lower stock prices.
This is pertinent information, because a stock cannot sustain a move toward higher or lower stock prices unless the applicable momentum is supporting it.
For instance, each and every time a bullish MACD signal was generated, FFIV stock staged a move toward higher stock prices. The latest bullish MACD signal was generated right beneath the significant level of price resistance. Given its close proximity to this level, I had the inclination to believe that resistance was likely to be broken on this attempt.
With resistance broken, higher F5 Networks stock prices are likely to follow. The notion of higher prices is magnified when it is taken in the context of the large wave structure that was also just completed.
This large wave structure is highlighted on the following FFIV stock chart.
Chart courtesy of StockCharts.com
The above F5 Networks stock chart illustrates a large wave structure consisting of an impulse wave and a consolidation wave. What makes these waves special is that they are responsible for creating and sustaining a trend.
The impulse wave, highlighted in green, is advancing in nature, and it defines the stage in a bullish trend when a stock sustains a move toward higher prices.
The consolidation wave, highlighted in purple, is corrective in nature, and it defines the stage in a bullish trend when a stock price corrects. Corrective price action is necessary in every bullish trend because it creates the conditions that are necessary for an advancing impulse wave to follow.
The significant level of price resistance was responsible for creating a very large consolidation wave. Now that resistance is broken, it implies that this very large consolidation wave is complete and, therefore, that much higher stock prices—via an impulse wave—are likely to follow.
The reason why I say “much” higher stock prices are now likely to follow is that the size of the move that follows is directly related to the size of the waves that preceded it. The previous waves were very large, so a very large move toward higher FFIV stock prices is expected to follow.
F5 Networks stock has just broken above a very significant level of price resistance, which completed a very large consolidation wave.
This breakout event suggests that much higher stock prices, via a impulse wave, are now in development. As a result, I am now bullish on FFIV stock.