Technical Analysis: Internap Stock Sets Up Its Next Move Towards Higher Prices

INAP Stock
iStock.com/Yozayo

INAP Stock: Path of Least Resistance Is Geared Towards Higher Stock Prices

The stock market is on an absolute tear, sporting new all-time highs on what feels like a daily occurrence. The once-lagging small-cap sector has finally joined the party and some of best-performing names are now within this asset class. I am focusing on a small-cap name in Internap Corp (NASDAQ: INAP) stock because it has made a number of bullish strides since I focused on it last. There are now new indications being generated on the company’s stock chart that suggest higher INAP stock prices are on the horizon.

I originally focused on Internap stock on July 17 of this year, in a publication titled “Internap Stock Is in Perfect Alignment to Stage an Advance.” On that date, this investment was trading at $4.03. Two-and-a-half months later, the suggestion of higher stock prices proved fruitful, because INAP stock is currently trading at around $4.92, representing a respectable 22.08%% return over that time frame.

My supporting arguments suggesting that higher Internap stock prices were on the horizon were based on analyzing this investments stock chart. This method of analyzing a stock chart is known as technical analysis, and it is predicated on the notion that investments have embedded trends, and therefore historical volume and price data can be used to forecast its future direction.

It was the price action on the following Internap stock chart that suggested—and continues to suggest—that higher INAP stock prices are on the horizon.

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INAP stock charts

Chart courtesy of StockCharts.com

The INAP stock chart has been annotated in order to highlight the waves that are responsible for creating constructive price action.

Constructive price action consists of two distinct waves consisting of impulse waves and consolidation waves.

The impulse waves are highlighted in green and these waves define the period in a bullish trend where the investment stages an advance towards higher stock prices.

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The consolidation waves are highlighted in purple and these waves define the period in a bullish trend where the investment stages a correction in order to alleviate the overbought conditions that were created during the preceding impulse wave. This wave creates the required conditions to set up the next advancing impulse wave.

These waves feed off each other, and in an alternating two-wave structure, they create the necessary conditions where a trend can develop, sustain itself, and flourish. The price action on the Internap stock chart is an excellent example of these waves sustaining a bullish trend.

In July, I focused on the consolidation wave that was in development. I stated that because INAP shares exited the pattern in an upward direction, another impulse wave was set to develop. That is the exact scenario that played out, and I am once again focusing on this investment because similar circumstances are occurring on the stock chart.

On October 5, 2017, INAP stock exited the current consolidation wave that was in development, implying that a new impulse wave is once again in development, and therefore higher stock prices are on the horizon.

The constructive price action that has dominated the trading action since Internap stock bottomed in late 2016 has been reinforced by a very influential momentum indicator, which is highlighted on the following stock chart.

INAP stock chart

Chart courtesy of StockCharts.com

The focus of this stock chart is the moving average convergence/divergence (MACD) indicator located in the lower panel.

MACD is a trend-following momentum indicator that uses the crossing of a signal line in order to distinguish between bullish and bearish momentum.

In August 2015, a bearish MACD signal was generated, which indicated that bearish momentum was influencing the stock price. Bearish momentum creates a path of least resistance geared towards lower stock prices, so it is not a surprise that a significant sell-off ensued after this indication was generated.

In February 2017, a bullish MACD cross was generated, which indicates that bullish momentum is influencing that trading action, creating a path of least resistance geared towards higher stock prices.

The MACD indicator is reinforcing the constructive price action that is supporting the move towards higher INAP stock prices, and as long as the MACD indicator remains in bullish alignment, I will have the inclination to believe that higher stock prices are on the horizon.

Analyst Take: 

The price action on the Internap stock chart is constructive in nature, which supports the notion that a bull market is still in development. The completion of the consolidation wave on October 5 is suggesting that a move towards higher INAP stock prices can now be expected. I will maintain my bullish view on this investment until there are indications that suggest another view is warranted.