HIMX Stock: Staging a Bullish Advance
I previously highlighted Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) stock on March 8, 2017, in an article titled “Himax Stock Chart Is Setting Up to Send Prices Soaring,” because I had reason to believe that a bullish price pattern was in development.
It brings me great pleasure to follow up on that publication six months later with the news that HIMX stock has just completed this price pattern, and that, therefore, bullish implications are now expected to follow.
If you have never read one of my publications before, let me warn you that my views on investments are not generated by using fundamental analysis. I have been schooled in this method, and I understand and support its merits but, when it comes to timing an entry or exit point in an investment, I’m sorry to say that fundamental analysis provides little in that regard.
As a result, I have spent almost two decades educating myself in technical analysis, which involves generating a view on an investment by analyzing its stock chart. This method of investment analysis is based on price and volume data, and this information is indeed very timely. When this method of analysis is applied correctly, the results are outstanding. It is unfortunate that this method of analysis doesn’t get the praise that it deserves.
I am bullish on Himax stock because, aside from the pattern that was just completed, there are indications on the HIMX stock chart that suggest and reinforce the notion that a bullish view is warranted.
The following Himax stock chart illustrates the indications that are responsible for generating this view.
Chart courtesy of StockCharts.com
Over the past three-and-a-half years, HIMX stock has been trapped within the confines of a descending triangle. A descending triangle contains two converging trend lines: one line represents resistance and the other represents support. These patterns are known for their particularly explosive breakouts, and it is why I have been keeping my eye on Himax stock, waiting for such an event to occur.
The confinement of space caused by the contraction of support and resistance levels causes momentum to build within the pattern as it develops. This momentum is released when the pattern is completed and the stock price breaks above resistance or below support. The size of the pattern is directly related to the size of the reaction that is expected to occur. As the title suggests, HIMX stock has just broken out of this descending triangle pattern that has been in development for almost three-and-a-half years, and now a substantial move toward higher stock prices can be expected.
The wave structure reaffirms and reinforces this view, because the descending triangle, by definition, is a consolidation wave, and this pattern sets up and separates impulse waves.
Impulse waves define the period in a trend where the stock price stages an advance, and consolidation waves define the period in a trend where the appropriate conditions are created so a new advancing impulse wave can develop. These waves in an alternating wave structure are what is referred to as constructive price action, which creates the necessary conditions to set up and sustain a bullish trend.
The completion of the consolidation waves suggests that a new advancing impulse wave is now in development, and that, therefore, higher Himax stock prices are on the horizon.
The breakout of the descending triangle coincides with a bullish MACD cross. MACD, which is an acronym for moving average convergence/divergence, is a trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
Stocks have embedded trends and, in order to stage a bullish advance or a bearish decline, the necessary momentum is needed. The bullish MACD cross indicates that bullish momentum is influencing the stock price and that, therefore, HIMX stock is geared toward higher prices.
The last time a bullish cross was generated near the zero line, an impulse wave developed, and the current environment supports a similar outcome.
Analyst Take: The technical price pattern that was outlined in March of this year has finally been completed, and it suggests that higher Himax stock prices are on the horizon. This bullish view is being supported by a compilation of indications, including a bullish wave structure and a bullish MACD cross.
As a result, I will continue to believe that higher HIMX stock prices are on the horizon—until there are indications that suggest that another view is warranted.