MULE Stock: All Set to Outperform in 2018
The defining characteristic of the market indices have changed in 2018 as volatility reigns supreme and wild market swings have become the norm. The tranquil walk-in-the-park environment that dominated the trading action in 2017 is no more and, if you ask any seasoned investor or trader, they would probably agree that the price action last year was more of an anomaly or an exception to the rule.
According to Newton’s third law, which states that every action has an equal and opposite reaction, one can expect that, when coming out of a protracted low volatility environment, a high-volatility environment will follow. A seasoned trader should welcome these wild swings because volatility creates opportunities.
I like volatile markets because they make my job a little bit easier; inherently strong investments stand out in this type of environment. That’s how I stumbled upon Mulesoft Inc (NYSE:MULE).
Aside from a brief dip in February, Mulesoft stock has shrugged off the market weakness like it was a non-event. The stock is currently forging a new all-time high, and it is up 40.46% year-to-date. The price action is the reason why I stumbled upon Mule stock stock and it is the reason I continue to like it.
A powerful pattern was completed on February 15, and the move that followed was a direct result of it. This powerful pattern is highlighted on the following Mulesoft stock chart.
Chart courtesy of StockCharts.com
The powerful pattern highlighted on the MULE 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. Connecting the sequence of highs and lows generates two converging trend lines, which define the symmetrical triangle and its respective levels of price support and price resistance.
These patterns are particularity powerful and explosive because, as the pattern develops, the range between support and resistance continues to contract. This contraction of space causes energy to build within the pattern, as traders position themselves on either side of the trend lines representing support and resistance in anticipation of the pattern being completed.
On February 15, the symmetrical triangle was completed when MULE stock closed above resistance. This feat is highlighted on the Mulesoft stock chart as a breakout. The next day, the stock gapped higher by 10.03%, confirming the breakout.
The price gap is very significant and should not be dismissed. The gap highlighted on the Mulesoft stock chart is a breakaway gap. Breakaway gaps rarely get filled and almost always suggest that a new trend has begun. The key word here is “begun,” because the gap remains open and higher prices have followed.
I have reason to believe that much higher prices are on the horizon. The constructive price action off of the February lows, which is highlighted on the following Mulesoft stock chart, supports this notion.
Chart courtesy of StockCharts.com
This MULE stock chart has been annotated in order to highlight the wave structure responsible for creating constructive price action.
Constructive price action creates the necessary building blocks to sustain a bullish trend. These building blocks consist of impulse waves and consolidation waves.
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 usually ends in an overbought condition, and the consolidation that follows unwinds these overbought conditions, creating the necessary environment for a new advancing impulse wave to follow. The corrective nature of a consolidation wave is why it refrains from advancing.
These waves work hand-in-hand, creating the necessary conditions for a bullish trend to flourish.
The Mulesoft stock chart illustrates that a consolidation wave was just completed on March 2, and that, therefore, an impulse wave is now in development and higher prices can now be expected.
Aside from just suggesting that higher prices are on the horizon, this wave structure can be used to suggest a price objective for the impulse wave that is currently in development. This is accomplished using the theory behind this wave structure that states that impulse waves separated by a consolidation wave tend to mirror each other in length. Applying this theory suggests that $40.00 is a viable MULE stock price objective.
A powerful technical pattern was completed on the Mulesoft stock chart and is currently suggesting that higher MULE stock prices are likely to follow. I will maintain a bullish view on this investment until there are indications suggesting otherwise.