Garmin Stock Still Destined for Higher Stock Prices

Garmin stock
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GRMN Stock: Targeting a $79.00 Price Objective

Summer is now in full swing, which means the summer doldrums have taken effect.

This is the time of the year where directional moves and volume have a tendency to drop off. But this does not mean that stocks are not setting up to make their next moves.

I am following up on a series of reports covering Garmin Ltd. (NASDAQ:GRMN) stock, because I continue to believe that GRMN stock is destined for higher stock prices.

I originally stumbled upon Garmin stock in September 2017, when I  noticed that a very compelling technical price pattern was being painted on the company’s stock chart.

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This compelling technical price pattern is highlighted on the following Garmin stock chart.

Chart courtesy of StockCharts.com

The technical price pattern highlighted on the GRMN stock chart is a cup-and-handle pattern.

Cup-and-handle price patterns are characterized by price action that creates two distinct troughs, where the first trough is much larger than the second. These troughs create a picture that looks like a teacup, which is why this pattern is called a cup-and-handle pattern.

These troughs were created because a significant level of price resistance prevents the stock price from advancing beyond it. This level of price resistance resides at $51.50 (adjusted for dividends). It was first established in June 2014.

Three years later, on September 25, 2017, GRMN’s stock price broke above resistance, completing the cup-and-handle price pattern. This event suggested that higher prices were in development—and continues to suggest the same now.

The thing about completed cup-and-handle price patterns is that aside from suggesting that higher prices are in development, they also are kind enough to provide a price objective.

This price objective is obtained by taking the depth of the cup and extrapolating that value above the significant level of price resistance that created the pattern.

Applying this method suggested that $79.00 was a viable price objective.

I continue to believe that Garmin stock is on track to hit that price objective, because it coincides with significant levels of price resistance. These are highlighted on the following GRMN stock chart.

Chart courtesy of StockCharts.com

The significant level of price resistance I am referring to, which is highlighted on this Garmin stock chart, was created by the previous all-time high and an ascending channel.

The previous all-time high resides at $80.52. It was created in October 2007, right before the financial crisis hit. This caused the share price to crater.

The ascending channel is a bullish trend characterized by a series of higher highs and higher lows. Connecting the peaks and troughs created by this price action produces two upward-sloping trend lines that capture this pattern.

These trend lines pinpoint where price resistance and price support reside.

This is important information because, as long as GMRN stock is trading within these trend lines, the bullish trend remains intact.

In January 2016, GRMN stock tested price support. Since that day, higher prices have prevailed.

The price resistance that outlines this pattern sits north of $80.00. This is roughly in line with the previous all-time high and the potential price objective suggested by the cup-and-handle price pattern.

These coinciding metrics are reinforcing the notion that the price objective laid out by the cup-and-handle pattern is both credible and attainable.

I have reason to believe that a number of these metrics are going to be tested in the not-too-distant future. The price action highlighted on the following Garmin stock chart is suggesting that GRMN stock is about to embark on its next leg toward higher prices.

Chart courtesy of StockCharts.com

This Garmin stock chart highlights a wave structure—consisting of impulse waves and consolidation waves—that has been known to create and sustain a bullish trend.

The wave highlighted in green is an impulse wave. It captures the stage in a bullish trend where a stock sustains a move toward higher prices.

The wave highlighted in purple is a consolidation wave. It captures the stage in a bullish trend where the stock price corrects and digests the gains from the impulse wave that preceded it.

The development of these waves has been supported by the moving average convergence/divergence (MACD) indicator.

MACD is a trend-following momentum indicator that distinguishes whether bullish or bearish momentum is influencing the price action in a stock.

This is pertinent information because a stock cannot sustain a directional move toward higher or lower prices unless the applicable level of momentum is supporting it.

This is why advancing impulse waves have been supported by bullish momentum, and corrective consolidation waves have been supported by bearish momentum.

Garmin stock is currently in a consolidation wave. But the MACD indicator has already swung into bullish alignment, suggesting that an impulse wave is on the horizon. A sustained move toward higher GRMN stock prices is likely to follow, putting Garmin stock one step closer to reaching its price objective.

Analyst Take

The completed technical price pattern on the Garmin stock chart continues to suggest that higher stock prices are on the horizon. This is being reinforced by a number of technical indications currently suggesting that GRMN stock is about to embark on its next leg toward higher prices.

These indications are why I continue to hold a bullish view.I will maintain this view until there are indications suggesting otherwise.