NTDOY Stock: Awaiting a Resolution
I am focusing on Nintendo Co., Ltd (ADR) (OTCMKTS: NTDOY) stock because the price action on the NTDOY stock chart is showing signs of being constructive, which is why I have reason to believe that Nintendo stock is setting up to stage a move.
My current views on Nintendo stock and the ones that preceded it have all been generated by analyzing the company’s stock chart. This method of analysis is called technical analysis, and if you have been following my publications, you understand the value that this method of analysis can provide when it is applied appropriately.
I first stumbled upon the stock last summer after NTDOY stock doubled. The catalyst that sent the share price surging over a three-day affair was the introduction of the “Pokémon GO” mobile app that quickly became viral. It was not the surge in Nintendo’s stock price that piqued my interest but, instead, where the stock found price support.
The following NTDOY price chart illustrates the dynamic that captured my attention.
Chart courtesy of StockCharts.com
It took only four trading days for Nintendo stock to double and, two days later, the stock had already given up half of those gains. The trading action was wild, to say the least, but the level at which NTDOY stock found price support caught my eye. I have been watching and following this investment ever since.
The theory behind bullish price action is that, once an investment has completed its initial surge in a bull market, it will retrace approximately 50%–62% of that primary move before it regains its footing and resumes the trend toward higher stock prices.
The 50%–62% retracement level is not an arbitrary number; it was attained by using Fibonacci numbers. These numbers are highlighted on the price chart above.
Investors and traders alike use the Fibonacci retracement numbers to gauge countertrend price objectives. The most popular is the 50%–62% retracement level, and it has gained such popularity over the years that investment professionals refer to it as “trading into the box.”
NTDOY stock entered the box in early July after the share price spiked, and that level marked a key level of price support from that point forward. I have stated numerous times in previous publications that, as long as the stock price continued to trade above this level of price support, it was likely that a bullish move was still in development.
That idea was not ill-founded, because Nintendo proceeded to paint a compelling picture using constructive price action which suggested that a move to the upside was in the making.
The following NTDOY stock chart highlights the wave structure that created constructive price action.
Chart courtesy of StockCharts.com
This stock chart illustrates that shortly after the share price surged, a consolidation wave began to develop above the level of price support that was outlined by the Fibonacci retracement numbers. A consolidation wave is one of two waves that make up constructive price action.
The first wave that makes up constructive price action is an impulse wave, as highlighted in green on the above chart. The function of this wave is to define the stage in a bull market advance that is characterized by a swift and substantial move toward higher stock prices.
The second wave that makes up constructive price action is a consolidation wave, and it is highlighted in purple. The function of this wave is to define the stage in a bull market advance when overbought conditions from the preceding impulse waves are unwound in order to create the necessary conditions for a new impulse wave to develop.
These waves feed off each other and, in an alternating wave structure, they create the necessary environment where a bullish trend can thrive and flourish.
In March 2017, Nintendo shares exited the consolidation wave in an upward direction, suggesting that a new impulse wave was set to develop, and that is exactly what transpired.
A new consolidation wave is currently in development, and it is why I believe that Nintendo stock is setting up to make a move. A resolution to this wave pattern will dictate which direction the stock price is heading in next.
In order to simplify it, if Nintendo shares break above $45.00, higher stock prices can be expected, while a break below $38.00 would suggest that lower prices are on the horizon. At this moment, the best course of action is to wait for the pattern to resolve itself.
The price action on the Nintendo stock chart is suggesting that NTDOY stock is setting up to stage a move. I currently hold a neutral stance on this investment, and I am awaiting a move above $45.00 or below $38.00 as an indication of which direction the stock price is heading in next.
Given the bullish wave structure that preceded it, odds favor a resolution toward higher stock prices.