NTDOY Stock: Time to Act Accordingly
Nintendo Co., Ltd (ADR)(OTCMKTS:NTDOY) stock has been a pleasure to cover because its adheres to technical rules. Therefore, the only surprise I have come across is how well-disciplined Nintendo stock is when an indication is generated on the NTDOY stock chart.
I am focusing on this investment once again because the target price of $45.00, which I first laid out in a February 15, 2017 publication, “Nintendo Stock Chart Is Favoring the Bulls,” is fast approaching. At the time of this publication, NTDOY stock was trading at $25.81. It currently sits at $44.18, which is only a stone’s throw away of meeting my objective.
I began covering this investment shortly after the “Pokémon GO” frenzy swept the globe, and it caused a significant jump in NTDOY stock. In a matter of days, the shares surged by 112%, only to see them quickly back off those levels. I outlined a key level of price support at $24.00 that Nintendo needed to maintain in order to suggest that a bull market was still in development.
The following Nintendo stock chart illustrates the technical tool I used to determine that $24.00 was a significant level of price support.
Chart courtesy of StockCharts.com
The tool that is highlighted on the NTDOY stock chart above is the Fibonacci retracement numbers. This tool is used by traders and investors to gauge where levels of price support can be found. The theory behind these numbers is that once a primary move is completed, an investment will stage a counter-trend move that will retrace approximately 50%-62% of that primary move. This retracement, which is significant and painful to endure, is still within the context of a bull market.
The Fibonacci retracement numbers have become so popular among the investment community that it has dubbed this 50%-62% retracement as trading into “the box.” Traders will be watching this box in order to re-assume a bullish position or cover an existing short position, depending on the strategy they employ.
Nintendo stock entered the box shortly after the share price spiked in July and I was quick to point out that for any chance of a continued bull market, NTDOY stock needed to find its footing at the level suggested by the box. A rally quickly ensued off this level, but the stock price returned to test the box later that year in December 2016, and once again in January 2017.
The price action that was being painted on the price chart while price support was being tested was suggesting that another advance was in the making. The following Nintendo stock chart illustrates this notion.
Chart courtesy of StockCharts.com
The price action being painted on the NTDOY stock chart was a consolidation triangle. A consolidation pattern is one of two waves that is contained within constructive price action.
The first wave is an impulse wave, and it is highlighted in green. The function of this wave it to define a swift and substantial advance. The second wave is a consolidation wave, and it is highlighted in purple. The function of this wave is to create the necessary conditions so a new advancing impulse wave can develop. These two waves in an alternating wave structure generate the necessary building blocks so a sustained trend can develop.
In March 2017, Nintendo shares exited the consolidation wave in an upward direction via a “breakout,” suggesting that a new impulse wave was set to develop. This notion was being reinforced by a bullish moving average convergence/divergence (MACD) cross that was generated in that same month. MACD is a momentum indicator that is used to distinguish whether bullish or bearish momentum is driving the direction that the share price is trading in.
Bullish momentum is needed to stage an advance, and these coinciding indications suggested that one was about to take place. I outlined these developments in a publication titled “Nintendo Stock Is Breaking Out, Pointing to Higher Prices,” outlining the bullish repercussions suggested by these indications.
The $45.00 target I mentioned in that publication and the one before it, was generated using the alternating wave structure. This price objective was obtained using the theory that impulse waves that are separated by a consolidation wave tend to mirror each other in terms of height. The first impulse wave was $21.00 in height, so I assumed that the impulse wave that was set to develop would mirror that height.
Nintendo shares are currently trading at $44.00, and the price objective of $45.00 is fast approaching. At this juncture, I expect some sort of reaction, in terms of a pullback, to occur once that level is attained.
Bottom Line on Nintendo Stock
Nintendo stock is approaching the potential price objective I laid out on February 15, when NTDOY stock was trading at $25.81. To act in accordance with my investment strategies, I would exit this investment, expecting a pullback to occur after this level is obtained. I would then wait for new indications to develop that would instruct me when it was OK to re-enter this investment.