Technical Analysis: Himax Stock Is Primed for Further Gains

Himax stock
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HIMX Stock: On the Verge of All-Time High

2017 has proven to be an excellent year for Himax Technologies, Inc. (ADR) (NASDAQ: HIMX) stock, and it is currently up 116.23% year-to-date. The reason why I am focusing on Himax stock once again is that even though the gains year-to-date have been impeccable, I have reason to believe that further gains are still in development. These beliefs are centered around the price action and indications generated on the HIMX stock chart.

Using a company’s stock chart to analyze an investment is known as technical analysis, and this method is based on the notion that historical data can be used to forecast what the future may bring. I have spent nearly 20 years studying and applying this method.

Looking at a stock chart using different time frames is a great way to determine whether a stock is a good investment, and this is exactly the approach I used for Himax stock.

The following Himax price chart illustrates the technical pattern suggesting that further gains are in development.

Himax Stock Chart

Chart courtesy of StockCharts.com

This HIMX stock chart has been annotated in order to highlight the descending channel that has been in development since early September.

This pattern is identified using two parallel downward-sloping trend lines that represent respective levels of price support and price resistance. When the stock breaks above resistance or below support, it will dictate whether higher or lower prices will prevail.

Descending channels—or flags, as they are referred to—are continuation patterns because, on average, the stock price breaks above resistance and higher prices prevail.

On November 16, HIMX stock broke above resistance, and in short order, new year-to-date highs were created, correctly implying that this pattern is suggesting that the current trend is still in development.

This trend I speak of began in February of this year, and it is highlighted on the following stock chart.

Himax Stock Chart

Chart courtesy of StockCharts.com

This HIMX stock chart has been annotated in order to highlight the bullish trend that has been responsible for the impeccable performance this year.

This trend contains the quintessential characteristic that defines all bullish trends: a sequence of higher highs and higher lows. This bullish trend is captured using a simple uptrend line, which has been created by connecting the sequence of higher lows.

Using the uptrend line as a tool is quite an easy endeavor because it acts as a significant level of price support. This uptrend line has been tested numerous time this year, and every time an attempt was made to move below it, investors were eager to step in and uphold this level of support.

As long as Himax stock is trading above this significant level of price support, I can only assume that higher prices shall prevail because this is and continues to be the path of least resistance.

This notion that higher stock prices are likely to prevail is reinforced by the indications that have been generated on the following Himax price chart.

Himax Stock Chart

Chart courtesy of StockCharts.com

This chart is very special and it was highlighted on September 5, in a publication titled “Himax Stock Breaks Out, Bullish Implications to Follow,” when HIMX stock was trading at $10.46.

The constructive price action and influential momentum indicator highlighted on this Himax stock chart were suggesting and continue to suggest that a move toward higher stock prices is in development.

Constructive price action consists of an alternating wave structure made up of impulse waves and consolidation waves.

Impulse waves define the periods in a bullish trend where stock prices stage sustained and substantial moves toward higher prices. Consolidation waves define the periods in a bullish trend where stock prices correct and refrain from advancing. A consolidation wave is very important because it creates the conditions so a new impulse wave can follow. These waves work in tandem in order to create and sustain a trend.

In August, HIMX stock broke out of the consolidation wave, implying that it was complete and that a new impulse wave was in development. This impulse wave suggesting that higher prices were in development was reinforced by the bullish moving average convergence/divergence (MACD) cross that was generated that same month.

MACD is a momentum indicator that is used to determine whether bullish or bearish momentum is influencing the price action in a stock. This indicator is influential because in order to stage a sustained move toward higher prices, bullish momentum is required.

Himax stock is challenging its all-time high, which resides at $14.69. A break above this level will open the door to much higher prices because there will not be any overhead resistance to stop the HIMX stock price from advancing.

Analysts Take:

I am bullish on Himax stock because the indications generated using the company’s stock chart continue to suggest that higher HIMX stock prices are on the horizon. I will maintain this bullish view until there are indications suggesting that another view is warranted.