FireEye Stock Is on the Verge of Something Glorious

 fireeye stock analysis
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FEYE Stock: A New Bull Market Is on the Horizon

Not a day goes by that I don’t wish I was in 2017 again. I reminisce about the days where the markets would climb day in, day out, and investing was like a walk in the park on a nice sunny day. The current market environment feels nothing like last year because volatility has been a defining characteristic this year. So as a result, 2018 feels like riding a roller coaster ride on a rainy day, which is not exactly a comfortable feeling.

Volatile markets can be very unnerving, and not exactly suitable for the passive investor. This market environment is better suited for stock pickers, like myself, where my skill set can be put to the test.

I am currently focusing on FireEye Inc (NASDAQ:FEYE) stock because FireEye stock is approaching a very important inflection point, and what FEYE stock does here will determine what this stock does next.

Before I outline this inflection point, let me begin by stating that I already carry a bullish bias toward FireEye stock because it created a technical signal in May of last year, suggesting that a new bull market was in development.

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This technical indicator is highlighted on the following FEYE stock chart.

Chart courtesy of StockCharts.com

This FEYE stock chart focuses on a signal that is generated when the 50-day and 200-day moving averages cross.

When the 50-day moving average crosses below the 200-day moving average, it creates a bearish signal denoting that a bear market is in development. This crossing of the moving averages is called a death cross, and this ominous-sounding indicator is obviously something we would all want to avoid.

When the 50-day moving average crosses above the 200-day moving average, it creates a bullish signal denoting that a bull market is in development. This crossing of the moving averages is called a golden cross, which sounds much better than its polar opposite, which is obviously why it should be embraced

In September 2015, a death cross was generated, suggesting that a bear market was in development. For the next 20 months, the moving averages that created this signal remained in bearish alignment. During this time frame, FEYE stock shed 67.97% of its market value, proving that a death cross should be avoided.

So imagine my delight when a golden cross was finally generated in May 2017, suggesting that the worst was behind FEYE stock and that a new bull market was once again in development.

Since that date, FireEye stock has been basing, and in this process, the price action has created a technical price pattern that is on the verge of being completed.

Chart courtesy of StockCharts.com

The technical price pattern highlighted on the FireEye stock chart is an inverse head and shoulders pattern.

This technical price pattern is identified by its three distinct troughs, where the first and third toughs are of equal size, while the middle trough is the largest. This pattern developed because a significant level of price resistance, which resides at $19.00, is preventing FEYE stock from advancing beyond it.

A confirmed close above this point will complete the pattern, suggesting that a trend reversal has taken place and higher stock prices will follow. A completed inverse head and shoulders price pattern will also reinforce the notion suggested by the golden cross that a new bull market is in development.

A break above this level of price resistance will not only complete the inverse head and shoulders price pattern, but it will also break above a long-standing downtrend line that has defined the bearish trend in FireEye stock.

This downtrend line is highlighted on the following FEYE stock chart.

Chart courtesy of StockCharts.com

This FEYE stock chart illustrates that a bearish trend has been in development since March 2014, after the stock prices peaked at $97.25. This bearish trend contains the quintessential characteristic that defines all bearish trends, which is price action containing a sequence of lower lows and lower highs.

Connecting the sequence of lower highs creates a downtrend line, and this simple tool, which acts as a level of price resistance, defines the bearish trend. In order to negate the bearish implications suggested by this downtrend line, FireEye stock needs to close above it.

This downtrend line is currently being tested, and resistance outlined by this downtrend line currently coincides with resistance outlined by the inverse head and shoulders price pattern. A break above $19.00 will create coinciding indications suggesting that the bear market in FEYE stock has finally come to an end and that a new bull market is once again in development. I would not be the least bit surprised to see a glorious move toward higher prices once this event unfolds.

Analyst Take

A significant level of price resistance currently resides at $19.00, and once FireEye stock breaks above it, I believe it will confirm the notion that a new bull market has finally begun and that higher FEYE stock prices will follow.