ICPT Stock: Is a Bottom Finally Being Forged?
Since the end of January 2018, the markets have been under duress, volatility has been elevated, and wild market swings are a daily occurrence. This price action can be unnerving for investors because stocks can fluctuate by large percentage points on any given day.
Volatile environments like this one are transitionary in nature; either the market is forging a top or new leadership is going to move to the forefront and push the markets higher. I still believe the latter because the markets continue to maintain their footing above key levels of price support.
I must say that I am not a fan of these volatile markets—I much preferred the daily grind higher that characterized the price action all of last year—but it does not mean that there are no opportunities currently being created in this environment.
I have come across Intercept Pharmaceuticals Inc (NASDAQ:ICPT), and the price action on Intercept Pharmaceuticals stock chart is possibly suggesting that a bottom in ICPT stock is forming.
The price action I am referring to is a technical price pattern, which is highlighted on the following ICPT stock chart.
Chart courtesy of StockCharts.com
The completed technical price pattern highlighted on the ICPT stock chart is a descending channel. This technical price pattern is characterized by bearish price action that contains an orderly sequence of a series of lower highs and lower lows.
Connecting this sequence of lower highs and lower lows creates two parallel downward-sloping trend lines. These trend lines capture the pattern by defining where key levels of price resistance and price support can be found.
Descending channels such as this one capture the stage in a trend where the stock price oscillates in a well-defined range, and the next move is dependent on whether the stock price breaks above resistance or falls below support.
On April 5, 2018, Intercept Pharmaceuticals stock broke above the trend line representing resistance, completing the descending price channel, suggesting that the ICPT stock price is now likely to appreciate.
The completion of this pattern is important because it could be suggesting that a bottom in Intercept Pharmaceuticals stock is being put into place.
ICPT stock has been within the confines of a very large consolidation wave, and a bottom would suggest that this wave is approaching completion and that an impulse wave is likely to follow.
These waves I just described are part of an alternating wave structure, which is highlighted on the following Intercept Pharmaceuticals stock chart.
Chart courtesy of StockCharts.com
This ICPT stock chart highlights a wave structure that is 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. In a bullish trend, an impulse wave is advancing in nature and it therefore 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. In a bullish trend, a consolidation wave is corrective in nature and it therefore captures the stage in a bullish trend when a stock price corrects and refrains from advancing. This corrective price action is necessary for every bullish trend because it creates the necessary conditions to sustain an impulse wave.
Intercept Pharmaceuticals stock has been within the confines of a consolidation wave since January 2014, and the bullish repercussions suggested by the completed price channel are suggesting that the consolidation wave is possibly coming to an end. In order to confirm the notion that the consolidation wave is complete and a new impulse wave is in development, ICPT stock needs to close above $100.00, which is currently price resistance outlined by the consolidation wave.
Luckily, the price channel is not the only indication that is possibly suggesting that such an outcome is possible, because the moving average convergence/divergence (MACD) indicator is converging and a bullish signal is possible in the weeks ahead.
MACD is an indicator that distinguishes whether bullish or bearish momentum is influencing the trading action in a stock. A bullish MACD cross implies that momentum is influencing a stock toward higher prices, while a bearish MACD cross implies that momentum is influencing a stock toward lower prices. Momentum is a very powerful driver because a stock cannot a sustain a move in either direction unless the applicable momentum is supporting it.
The entire time the consolidation wave has been in development, the MACD indicator has been in bearish alignment. A bullish MACD cross will suggest that the consolidation wave is complete and that higher Intercept Pharmaceuticals stock prices via an impulse are in development.
I am watching the price action on the Intercept Pharmaceuticals stock chart because a completed price pattern is implying that ICPT stock is now likely to appreciate. If this is indeed the case, there is the possibility that this stock is finally putting in a bottom, and much higher prices will prevail as a result. In order to confirm this notion, Intercept stock needs to generate a bullish MACD signal and close above $100.00.