NTDOY Stock: A Bullish Setup
Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) stock has once again caught my eye. There is a pattern that is developing on the price chart and it is becoming quite constructive. If this pattern plays out, a significant move in the price could be on the horizon.
The driving force behind this move could be the holiday season, as malls are once again filled with eager shoppers buying the latest and greatest that the world has to offer. Nintendo’s new platform isn’t due until after the new year, but the company has made a splash with its “NES Classic Edition.” The console is a rehash of Nintendo’s 1985 game console. It includes 30 classic games and it’s selling for $59.99. I want one, so perhaps it will be a hit.
The last time I covered Nintendo stock, it had made a splash this summer with “Pokémon Go.” The mania surrounding this app sent NTDOY stock soaring, but news quickly followed that Nintendo was not the sole owner of this viral app, and the stock sold off as a result. In my previous report on Nintendo stock, I outlined that, in order for NTDOY stock to remain bullish, it would need to hold a certain level of price support.
The following Nintendo stock chart illustrates the level that I outlined that needed to hold.
Chart courtesy of StockCharts.com
The NTDOY stock chart above illustrates that $24.00 was a key level of support, and there were two metrics that supported this price point.
The first metric was in the form of a horizontal level of support. This level acted as a previous level of resistance in 2015 as Nintendo stock was rejected from moving beyond this level on multiple occasions. In July 2016, the mania surrounding Pokémon Go caused NTDOY stock to gap above this level and effectively break through this resistance level in dramatic fashion. When a strong level of resistance is finally broken, it is not uncommon for the price to return to that level from above and confirm that this is now a new level of support.
The second metric that supported this level of support was generated using the Fibonacci retracement numbers. The Fibonacci retracement numbers (highlighted in green) are a very popular tool used by many technical traders. This tool is used to identify countertrend price objectives.
On average, a stock will will retrace approximately 50%-62% of the predominant trend and still be within the confines of that dominant trend. Traders refer to this zone as “the box,” and it usually offers support as traders will be eyeing this zone as an area to enter long positions, and/or cover short positions.
NTDOY stock has continued to hold this level of support, and this bullish price action has allowed a constructive pattern to develop.
The following Nintendo stock chart illustrates the constructive pattern that has been developing.
Chart courtesy of StockCharts.com
Ever since the price spike that developed after the Pokémon Go app was released, Nintendo stock has been developing a symmetrical triangle. A symmetrical triangle is a consolidation pattern that contains two converging trend lines. One trend line represents support and the other trend line represents resistance.
The price bounces from each respective trend line, and momentum is built each time the price is rejected by the trend line. The longer it takes for this pattern to complete, the more momentum is stored. That is why these patterns are particularly explosive.
Triangle patterns break out on average after 70% of the triangle is complete. NTDOY stock has almost satisfied this condition, so perhaps the anticipation with regards to the new console or better-than-expected sales of the NES Classic Edition could be the catalyst that finally completes this constructive pattern.
The moving averages are bullishly aligned after a golden cross was generated in July. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this signal to indicate that a bull market is on the horizon so, while this signal is engaged, bullish patterns have a higher probability of success.
Bottom Line on Nintendo Stock
The constructive pattern on the NTDOY stock chart is nearing completion, and a large move in the price can be expected. As long as the price action in Nintendo stock continues to act positively, a bullish outcome is expected.