IOVA Stock: The Power of Triangles
The markets came under a substantial amount of selling pressure at the end of January, which sent chills down the spines of investors. I probably sound like a broken record, but I’ll say it again: I believe that the sell-off was nothing more than a much-needed correction and, as a result, I firmly believe that higher index values will prevail.
Selling events like the ones that just occurred usually involve a changing of the guard, and when the market finally regains its footing and starts moving higher, it is unlikely that it will be the same sectors pushing up the indices. At the moment, the selling pressure has subsided. Throughout this time of duress, there was a particular sector holding its own; if you don’t know which one it was, I’ll be happy to point it out that it was the biotechnology sector.
A number of stocks following the sell-off have already started to forge new highs. One such stock that I am currently covering is Iovance Biotherapeutics Inc (NASDAQ:IOVA) stock. Iovance Biotherapeutics stock is obviously a biotechnology stock, but this actually has little to do with why I am focusing on it.
The actual reason why I am focusing on IOVA stock is that I am completely enamored with the company’s stock chart. The stock chart contains a powerful pattern that was completed in early January, and it has been responsible for the incredible move that resulted since then.
This technical price pattern is highlighted on the following Iovance Biotherapeutics stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the stock chart is a symmetrical triangle.
Triangle patterns are created when the price action is characterized by a sequence containing a series of higher lows and lower highs. In order to help identify these patterns, two converging trend lines were created by connecting the sequence of lower highs and the sequence of higher lows.
These trend lines not only help identify the pattern but they also outline significant levels of price support and price resistance. Due to the nature of this pattern, as it develops, the range between price support and price resistance continues to contract. The contraction of space causes energy to build in the pattern, which is finally released when the stock prices either break above resistant or fall below support. This is why triangle patterns are very powerful and known for their spectacular breakouts.
The size and scope of the reaction that can be expected to occur is directly related to the size of the pattern in development. This symmetrical triangle pattern was five years in the making, which means it was a very large pattern. Therefore, a very large reaction was to be expected once the pattern was finally resolved.
On January 16, 2018, the symmetrical triangle pattern was finally resolved when IOVA stock closed above the converging trend line that represented resistance. The reaction that followed was expected, yet at the same time, its magnitude was still quite astonishing. The Iovance Biotherapeutics stock price appreciated to the tune of 113.74% over a span of 26 trading days, which is quite remarkable.
Iovance Biotherapeutics stock is a perfect example of the repercussions associated with completed triangle patterns and a testament to the reason why this pattern is among my favorites. Triangle price patterns that have been created right after a stock has put in a bottom usually suggest that a new bullish trend is now in development and a prolonged period of higher the stock prices are likely to follow.
This notion of higher IOVA stock prices was just confirmed on February 23, 2018, when the stock price closed at a new high, breaking above the peak that resided at $18.00, which initiated the triangle pattern on October 4, 2013. Higher highs and higher lows are the quintessential characteristics that define all bullish trends, and this higher high reinforces the notion that Iovance Biotherapeutics stock has just begun its bullish ascent toward higher prices.
The completed symmetrical triangle on the stock chart is implying that the recent surge is the beginning of a new bullish trend and that, over time, higher IOVA stock prices will prevail. As a trading note, I would not chase the current move and would prefer to wait for constructive price action to develop before initiating a position.