FCEL Stock: Anticipating a Bullish Outcome
The month of May has come and gone, and if you believe in the notion that selling in May and going away is a good investment thesis, then you might be missing out on what may develop in the months ahead.
For instance, I am bullish because the Russell 2000 index, which is the small-cap index, has just forged a new all-time high. Small-cap stocks are generally very speculative in nature, and if this group is making new highs, it suggests that markets are quite healthy, suggesting that a bull market is still in development.
Sticking with this notion, I am focusing on a small-cap stock, FuelCell Energy Inc (NASDAQ:FCEL) stock, because I have reason to believe that FuelCell Energy stock is setting up to make a powerful move.
The reason why I believe that a powerful move is on the horizon is because there is a technical price pattern currently in development on the FCEL stock chart, which is alluding to such an exact outcome.
This technical price pattern is highlighted on the following FuelCell Energy stock chart.
Chart courtesy of StockCharts.com
The technical price pattern currently in development of the FCEL stock chart is a symmetrical triangle pattern.
Symmetrical triangle price patterns are characterized by price action that contains a sequence of lower highs and higher lows. Capturing this pattern is achieved by connecting the peaks and troughs that were created by the sequence of lower highs and higher lows. The process created two converging trend lines.
These trend lines capture the pattern by defining where price support and price resistance reside. This is important information because, in order to resolve and complete the symmetrical price pattern, FCEL stock needs to either break above resistance or fall below support.
Once the pattern is resolved, the reaction that follows is likely to be powerful because, by nature, triangle patterns are known for such exact outcomes.
The reason why these patterns are powerful is because the convergence of support and resistance causes energy to build within them. The longer the price action is contained between support and resistance, the larger the reaction will be once the pattern is resolved.
This pattern has been in development since October 2017, and I believe that the symmetrical triangle pattern will resolve itself in a bullish manner by breaking above price resistance.
These beliefs are based on the golden cross that was generated in September 2017.
A golden cross is a signal that is generated when the 50-day moving average crosses above the 200-day moving average. This signal suggests that a bull market is in development.
The moving averages that created this signal have remained in bullish alignment while the symmetrical triangle has been in development. This development is a sign of strength, and it supports a bullish outcome of the pattern that is currently in development.
The golden cross is not the only indication supporting a bullish outcome; the momentum indicator highlighted on the following FuelCell Energy stock chart is also supporting such an outcome.
Chart courtesy of StockCharts.com
The momentum indicator I am referring to is the percentage price oscillator (PPO) indicator, which is highlighted in the lower panel of the FCEL stock chart.
PPO uses the crossing of a signal line to distinguish whether bullish or bearish momentum is influencing the price action in a stock. Momentum is a very powerful force, and a stock cannot make a sustained move in either direction unless the applicable momentum is supporting it.
This is why the waves highlighted on the FuelCell Energy stock chart have coincided precisely with this indicator.
The waves highlighted in green are impulse waves. These waves capture the stage in a bullish trend when a stock makes a sustained move toward higher prices. These waves have developed when the PPO indicator has been in bullish alignment, when bullish momentum was influencing the price action.
The waves highlighted in purple are consolidation waves. These waves capture the stage in a bullish trend when a stock corrects and refrains from advancing. These waves have developed when the PPO indicator has been in bearish alignment, when bearish momentum was influencing the price action.
Impulse waves and consolidation waves are the building blocks that both create and sustain a trend.
The symmetrical triangle currently in development on the FuelCell Energy stock chart doubles as a consolidation wave. The PPO indicator is no longer in bearish alignment, suggesting that not only is the consolidation wave approaching completion, but that an advancing impulse wave is likely to follow on the FCEL stock chart.
I am watching FuelCell Energy stock chart with great anticipation because I have reason to believe that a powerful move is on the horizon. This powerful move is being fueled by a symmetrical triangle, and once it is resolved, a powerful move in FCEL stock is expected to follow.