ICPT Stock: Countdown to Liftoff
A trade war has become center-stage news, and it is the cause of the recent bout of selling pressure that has hit the markets. The prospects of a trade war are not good, and the increased cost of imported goods only ends up hurting the end consumer who has to pay more for things.
All this bad news has hit the major market indices, but if you look past the S&P 500 and the Dow Jones Industrial Average, you will notice that there are a number of stocks and sectors that have staged a stealthy move toward higher prices.
For instance, small caps, consumer discretionary, and biotech stocks have forged new highs in recent weeks. These sectors require healthy markets and a thriving economy. The fact that these sectors are outperforming reinforces the notion that these segments are still strong, which bodes well for things going forward.
I have chosen to focus on Intercept Pharmaceuticals Inc (NASDAQ:ICPT), which is a biotechnology stock, but more importantly, I believe that it is on the verge of breaking out toward much higher ICPT stock prices.
My beliefs are all technical in nature, so let’s begin with the technical price pattern I am currently watching.
The following Intercept Pharmaceuticals stock chart captures the technical price pattern I am currently watching.
Chart courtesy of StockCharts.com
The pattern highlighted on the Intercept Pharmaceuticals stock chart is a descending channel.
A descending channel is a price pattern characterized by a sequence of lower lows and lower highs, which is also the quintessential characteristic that defines a bearish trend.
Capturing this bearish pattern was achieved by connecting the peaks and troughs that were created by the sequence of lower highs and lower lows. This resulted in the creation of two downward-sloping trend lines.
These trend lines are very important because not only do they capture the pattern but they also pinpoint where price support and price resistance reside. In order to negate the bearish implications suggested by this pattern, Intercept Pharmaceuticals stock needs to exit the pattern by breaking above resistance, which resides at $95.00.
ICPT stock is currently approaching price resistance, and there are indications suggesting that the likelihood of breaking above it are high and rising.
The indications suggesting that Intercept Pharmaceuticals stock is poised for further gains are highlighted on the following ICPT stock chart.
Chart courtesy of StockCharts.com
This ICPT stock chart highlights a wave structure known to create and sustain a bullish trend.
This wave structure consists of impulse waves and consolidation waves.
The wave highlighted in green is an impulse wave. Impulse waves capture the stage in a bullish trend where a stock sustains a move toward higher prices. The wave highlighted in purple is a consolidation wave. Consolidation waves capture the stage in a bullish trend when a stock sustains a correction and refrains from advancing.
These waves create price action characterized by a series of higher highs and higher lows, which is the defining characteristic that describes a bullish trend.
The descending channel, which has been in development since January 2014, doubles as a very large consolidation wave. Breaking out of this pattern will imply that a large impulse wave is likely to follow, which will sustain a move toward much higher ICPT stock prices.
The moving average convergence/divergence (MACD) indicator has just recently generated a bullish signal, suggesting that it is only a matter of time before ICPT stock breaks above resistance and an impulse wave does follow.
MACD is a very influential momentum indicator that distinguishes whether bullish or bearish momentum is influencing the price action in a stock. Momentum is a very powerful force where a stock cannot a sustain a move in either an upward or downward direction unless the applicable momentum is supporting it.
This is why bullish momentum creates a path of least resistance geared toward higher prices, while bearish momentum creates a path of least resistance geared toward lower prices.
The entire time the consolidation wave has been in development, the MACD indicator has been in bearish alignment, supporting its development. The bullish cross that has just been generated is suggesting that the consolidation wave has likely run its course, opening up the door for an impulse wave to follow, where Intercept Pharmaceuticals stock can sustain a move toward higher prices.
I have the inclination to believe that Intercept Pharmaceuticals stock is on the verge of breaking out above price resistance, which currently resides at $95.00, and that much higher prices will follow. My beliefs are being reinforced by bullish a MACD signal, which is currently suggesting that ICPT stock is geared toward higher prices.