JBL Stock: On the Verge of a Breakout
Just when I thought that the markets have found their footing, volatility strikes again and a violent sell-off ensues. It was not long ago that this market could shrug off any potential damning news, but not anymore.
These volatile markets are good for traders because this group thrives off gyrating markets. Long-term passive investors do not share the same enthusiasm for volatility because high volatility is associated with weak or stagnant markets. It is too early to tell if the bull market in equities has run its course, but it’s safe to say that this environment is more conducive to stock pickers rather than passive investors.
As a stock picker, I look for certain technical qualities in an investment that imply that the stock is likely to appreciate, and this is exactly why I am currently focusing on Jabil Inc (NYSE:JBL) stock.
Jabil stock is on the cusp of breaking above a significant level of price resistance, and once it does, I believe that much higher JBL stock prices will follow.
This significant level of price resistance is highlighted on the following Jabil stock chart.
Chart courtesy of StockCharts.com
This JBL stock chart illustrates that a significant level of price resistance currently resides at $31.50, and it was first established in June 2017. This price point was revisited again in September 2017, but the moving average convergence/divergence (MACD) indicator was not in proper alignment to support an advance.
MACD is a trend-following indicator that uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing a stock. Bullish momentum implies that a stock is like to appreciate, while a bearish momentum implies that a stock is likely to depreciate.
The MACD indicator provides very pertinent information because a stock cannot sustain a move in either direction unless the applicable momentum is supporting it. This is why in September 2017, when the price resistance was being tested, the likelihood of a breakout was very slim because the MACD indicator was in bearish alignment, which was not supportive of a move toward higher prices.
It was not until March 2018 that a bullish MACD cross was finally generated, and true to its nature, the stock price began to appreciate. It is currently testing resistance once again. The difference this time is that the MACD indicator is in bullish alignment, supporting the notion of higher stock prices, which suggests that it is likely that resistance will fall, and Jabil stock will be set free to appreciate.
I have established that a confirmed close above $31.50 would imply that higher JBL stock prices are on the horizon, and in the context of this stock’s longer trend, it will also confirm that an impulsive move higher is in development.
The longer-term trend and the waves that were responsible for creating it are highlighted on the following Jabil stock chart.
Chart courtesy of StockCharts.com
The JBL stock chart illustrates a bullish trend has been created using constructive price action.
Constructive price action is an alternating wave structure consisting of impulse waves and consolidation waves, which are responsible for creating and sustaining a trend.
Impulse waves are the stage in a bullish trend when the stock price makes a sustained move toward higher prices. The advancing nature of this wave results in creating an overbought condition.
Consolidation waves are the stage in a bullish trend when the stock price corrects and refrains from advancing. This corrective price action unwinds the overbought condition that was created during the impulse wave, creating the necessary environment so a new advancing impulse wave can follow.
In March 2017, the consolidation wave highlighted on the Jabil stock chart was completed and an impulse wave began its development. After a substantial rise, the JBL stock price peaked and it returned to test the level of resistance that defined the consolidation wave.
Returning to test a previous level of price resistance is called a backtest, and it serves to reinforce the notion that the breakout was legitimate while simultaneously establishing that price point as a new level of price support.
Backtests act like springboards, so it is not a coincidence that once the backtest was complete, higher JBL stock prices followed. Currently, Jabil stock is testing resistance at $31.50 and breaking above it will imply that the impulse wave that began in March 2017 is still in development, reinforcing the notion that much higher stock prices are in development.
An influential technical indicator is currently in bullish alignment as Jabil stock is testing a very influential level of price resistance. Once this level is overcome, this feat will imply that much higher JBL stock prices are likely to follow.