FEYE Stock: Waiting for a Trigger
I am getting excited about the prospects of FireEye Inc (NASDAQ:FEYE) stock because I have the inclination to believe that the investment is setting up to stage a bullish advance. This view is a drastic change to what FEYE stock investors have been used to because a bear market has ravaged the share price in recent years. This bullish view on FireEye stock is a result of a number of indications on the company’s stock chart that are now suggesting that a bull market is in development.
I outlined many of these indicators on June 20 of this year, in a publication titled “FireEye Stock Is All Set to Build Upon This Year’s Gains.” These indicators that I focused on remain in bullish alignment, which continues to suggest that an advance is set to take place. I am updating that publication because new indications were generated, reinforcing this bullish view. These new indications are adding fuel to the bullish fire by suggesting that this move to the upside is possibly only moments away from initiating.
The following FireEye stock chart illustrates the first indications that served to suggest that a new bull market is in development.
Chart courtesy of StockCharts.com
This FEYE price chart focuses on the influential 50-day and 200-day moving averages. When these moving averages cross, a signal is generated that serves as either a bullish indication or a bearish one. The distinction between these indications depends on whether the 50-day moving average crosses above or below the 200-day moving average.
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In September 2015, a bearish indication was generated when the 50-day moving average crossed below the 200-day moving average. This crossing of the moving averages is called a “death cross” and it is highlighted on the stock chart. This bearish indication suggests that a bear market was in development, and therefore lower stock prices were expected to follow. FEYE stock proceeded to drop from a price of $32.00 to a low of $10.35, losing 67.97% before the stock price was finally able to find its footing. This example reinforces the notion that that a death cross should never be ignored.
In May of this year, a golden cross was generated when the 50-day moving average crossed above the 200-day moving averages. This indication put the bearish implications suggested by the death cross to bed, and it is now suggesting that a new bull market is in development. As a result, higher stock prices are now expected to follow.
In order to create the golden cross, FireEye stock had to break above the 200-day moving average. As a standalone indicator, this moving average acts as a dividing line that separates healthy bullish investments from unhealthy bearish ones. In August 2015, FEYE stock fell below this moving average, implying that bearish headwinds were swirling around this investment. The stock price was unable to trade back above this moving average until it gapped above it on May 3 of this year, suggesting that bullish tailwinds were now swirling around it.
FireEye shares are trading above both moving averages, which reinforces the bullish implications implied by both these indications.
The following FireEye stock chart illustrates the trigger that will suggest another stock price advance is underway.
Chart courtesy of StockCharts.com
This FEYE stock chart is highlighted to specifically pinpoint the alternating wave structure that is essential in creating a bullish trend. These alternating waves consist of impulse waves, which are highlighted in green, and consolidation waves, which are highlighted in purple.
Impulse waves define the stage in a bullish trend where a stock stages a price advance. Consolidation waves define the stage in a bullish trend where overbought conditions are alleviated as the stock price corrects. The unwinding of an overbought condition creates the necessary environment so a new impulse wave can develop. This results in a wave structure where the waves feed off each other, creating a sustainable and orderly trend.
The trigger that would suggest that FEYE stock is set to make another advance would be indicated when the stock price breaks out of the consolidation wave in an upwards direction. This would require the stock prices to close above $16.30.
The moving average convergence/divergence (MACD) indicator has just crossed in bullish manner, suggesting that a stock price advance is in order. MACD is a momentum indicator that is used to distinguish between bullish and bearish momentum. Momentum influences the trading action in a stock, and therefore, a price advance or a price decline can be expected, depending on whether bullish or bearish momentum is influencing it.
The FireEye price chart is a prime example of the influence momentum has on a company’s stock price, because every bullish MACD cross was accompanied by an impulse wave, while every bearish cross was accompanied by a consolidation wave. The bullish MACD cross that was just generated is suggesting that an impulse wave is set to develop, and once the stock price closes above $16.30, it will confirm this notion.
Bottom Line on FireEye Stock
Indications on the FireEye stock chart support the notion that new bull market is now in development. The next bullish advance in this bull market is set occur once FEYE stock closes above $16.30.