HIMX Stock: This Sector Is on Fire
Semiconductor stocks are all the rage and investors are always on the lookout for the best semiconductor stocks. Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) stock is a great play to exploit the hot money that is flowing into this sector.
When a sector such as this catches a bid, it creates a rising tide, and that rising tide serves to raise all boats within that sector. Taking this notion of a rising tide and combining it with bullish constructive price action creates an environment where a stock can really soar. The Himax stock chart is in such a position, with Himax stock currently trading at $7.66, and the price action is now suggesting that HIMX stock is ready to move.
When I refer to price action, I am referring to the knowledge I use to base my investment views and trading strategies. For those not familiar with my work, I am a proponent of technical analysis. This style of investment analysis is based on the notion that historical price and volume data can be used to forecast the future direction of price.
The following Himax stock chart illustrates the price action that is suggesting higher prices are likely.
Chart courtesy of StockCharts.com
Since early October, Himax stock was caught in a drift that sent prices lower. This drift lower contained lower highs and lower lows and is a perfect example of bearish price action. This price action is well defined using a simple downtrend line. This downtrend line is easily created by connecting the peaks on the price chart, and it is highlighted in blue on the chart above.
My excitement surrounding HIMX shares began to develop after this downtrend was finally broken when price closed above it. This price action is highlighted as a “breakout” on the chart above, which illustrates the moment it occurred. The breakout indicates that the bearish trend towards lower prices had finally concluded, and this now opens the door for a new bullish trend to develop.
The constructive price action that generated this breakout continues to suggest that higher prices are on the horizon. Constructive price action consists of impulse waves that serve to advance price, and consolidation waves that serve to unwind overbought conditions and set up the next impulse wave.
The impulse wave, highlighted in green, served to advance price and break the downtrend line. The consolidation wave, highlighted in purple, served to unwind some overbought conditions and set up the impulse wave that is now in development. This new impulse wave is suggesting that higher prices will now prevail.
The following HIMX stock chart illustrates that this new bullish development is within the context of a much larger technical pattern.
Chart courtesy of StockCharts.com
The price action over the past four years is starting to paint a picture that is resembling a descending triangle. A descending triangle by definition is consolidation pattern that contains two converging trend lines. One line represents resistance and the other represents support. Traders refer to these triangles as a zone of indecision, as the prior move is digested. These patterns are known for their particularly explosive breakouts.
This triangle is three years in the making, and large technical trading patterns are more significant, because they translate into equally large and lengthy reactions. The power that is generated from this pattern is a result of the converging trend lines. These trend lines cause a confinement of space, which causes momentum to build. This momentum is finally released when price exits the pattern.
This triangle is still in development and the low that was generated in 2017 bounced off support that was outlined by this descending triangle. This level also coincided with the trend line that acted as a resistance level from September 2014 to November 2015. The bounce off support is referred to as a “backtest” and it is not uncommon for price to return to a previous level of resistance and test it from above. These two coinciding levels indicated that support was strong at the $5.00 level, and the bounce that followed was no surprise.
The moving average convergence/divergence (MACD) indicator in the lower panel supports a price advance. MACD is trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. A bullish cross indicates that bullish momentum is propelling price, and HIMX stock is geared towards higher prices.
If I were to put a target on the Himax stock price, I would point to the resistance level that is outlined by the descending triangle that currently sits at the $10.00 level.
Last Words on Himax Stock
Multiple indicators, which are supported by bullish price action, are suggesting that the stock is heading higher. There is a large technical price pattern that is currently in development, that upon completion will suggest much higher stock prices. As a result, I am bullish on this position, and will remain so until these indications give me reason to believe that another view on HIMX stock is warranted.