This Is Why MNTA Stock Is Geared for Higher Prices

MNTA stock
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MNTA Stock: Reiterating My Bullish View

The current stock market environment is not weak. And, despite the headlines warning the general public about the implications of a trade war, the major market indices continue to push higher.

This move toward higher index values has been led by a broad-based selection of stocks and sectors, suggesting that the move has merit.

In light of recent events, I have decided to dismiss what the media is trying to spin. If the major market indices are not concerned about the possibility of trade war, then why should I be?

Small-cap stocks and biotechnology stocks have been performing extremely well in this environment. As a result, I have chosen to focus on Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). The fact that the company falls into both categories is one reason why I like it, but it’s not the main reason.

I decided to focus on Momenta Pharmaceuticals stock because, since my last report on the company, which was published on March 23, 2018, a lot has transpired.

For one, MNTA stock has broken out and higher prices have prevailed. It has appreciated to the tune of 61.6% since March 23. I believe that higher prices are still on the horizon.

The pattern responsible for creating these robust returns is highlighted on the following chart.

Chart courtesy of StockCharts.com

The pattern highlighted on the above MNTA stock chart is a price channel.

A price channel is created when price action is characterized by a static low and a static high that contain a stock price from sustaining a move toward higher and lower prices.

The price channel highlighted on the Momenta Pharmaceuticals stock was created by the peaks and troughs that were created by the static low at $13.00 and the static high at $19.00. These levels acted as significant levels of price support and price resistance.

On April 16, the stock broke out of the price channel, setting the wheels in motion, in which higher stock prices were likely to follow. Over the next few weeks, the stock price staged an advance. Then that move quickly petered out and Momenta stock was once again revisiting $19.00.

Testing a previous level of price resistance from above is called a backtest. Backtests serve to reaffirm that the original break above resistance was legitimate, while simultaneously establishing that level of resistance ($19.00 in this case) as a new level of price support.

Backtests act like springboards, and this instance was the perfect example of one because, once it was completed, much higher MNTA stock prices followed.

The completed price channel doubles as a consolidation wave, and its implications are illustrated on the following Momenta stock chart.

Chart courtesy of StockCharts.com

This stock chart highlights a wave structure consisting of impulse waves and consolidation waves.

The impulse waves, highlighted in green, capture the stage in a bullish trend when a stock makes a sustained move toward higher prices. The consolidation wave, highlighted in purple, captures the stage in a bullish trend when a stock corrects.

Impulse waves and consolidation waves work together, creating the stair-step price action responsible for building and sustaining a bullish trend.

The completion of the price channel, which doubles as a consolidation wave, correctly suggested that an impulse wave was likely to follow. This is why Momenta stock staged such an impressive advance.

The move toward higher prices captured by the impulse wave pierced a significant level of price resistance highlighted on the following MNTA stock chart.

Chart courtesy of StockCharts.com

This Momenta Pharmaceuticals stock chart highlights a significant level of price resistance, which resided at $25.50.

This level was first established in December 2005. There were three attempts to move beyond it until July 11, 2018, when the stock was finally able to sustain a close above it.

Breaking above this level of price resistance implies that higher prices are likely to follow, which is why I believe that higher prices are on the horizon.

The reason that higher prices are likely to follow is that there is no longer a level of price resistance to contain the stock price from advancing. This opens up the opportunity for higher prices to finally prevail.

Analyst Take

I am returning to reiterate my bullish view on Momenta Pharmaceuticals stock because a number of technical developments continue to reinforce the notion that higher MNTA stock prices are on the horizon.