NOK Stock: Geared Towards Higher Prices
Nokia Corporation (NYSE:NOK) is making a splash in consumer electronics, and this is being touted as the reason why NOK stock has begun to appreciate. I remember a time when a Nokia cell phone was the hottest item, and it rivaled competitors like Motorola.
A lot has changed, and both Nokia Corporation and Motorola are no longer dominant in this space, but Nokia stock lives on, and with life there is opportunity. There have been a number of bullish developments on the Nokia price chart that are supporting this advance.
To quickly clarify for anyone who has not had the pleasure of reading any of my previous publications, I generate my views on a potential investment by analyzing the company’s price chart. This method of investment analysis is called technical analysis, and it is based on the notion that historical price and volume data can be used to discern trends and forecast future prices.
The following price chart illustrates the bullish developments that have been supporting the advance in NOK stock.
Chart courtesy of StockCharts.com
The chart above illustrates a bullish trend that has taken hold since mid-November 2016. This rally contains higher highs and higher lows, which is the quintessential characteristic of a bullish trend. This bullish trend consists of constructive price action, so it can be assumed that this trend has the ability to continue.
Constructive price action consists of an alternating two-wave structure made up of an impulse wave, which is highlighted in green on the chart above, and a consolidation wave, which is highlighted in purple on the chart above.
The function of an impulse wave is price progression, which can come in the form of an advance or a decline. The function of a consolidation wave is to unwind any extreme conditions that were created during the impulse wave that preceded it, and more importantly, set up the next impulse wave. These alternating waves create the necessary building blocks in a sustainable trend.
I focus much of my attention on consolidation waves because these waves set up the next impulse wave. The direction of the developing impulse wave is usually dictated by the direction the stock exits the consolidation wave. Exiting the consolidation wave in an upward direction supports a bullish advance, while exiting the consolidation wave in a downward direction supports a decline.
Since the lows in November 2016, NOK stock has been exiting each respective consolidation wave in an upward direction, supporting an advance.
The moving average convergence/divergence (MACD) indicator, located in the lower panel, has been instrumental in identifying which wave is set for development. MACD is a simple, yet effective, trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
A bullish MACD cross serves to suggest that bullish momentum is influencing Nokia stock, and as a result, the path of least resistance is geared towards higher prices. Since November 2016, whenever this indicator was in bullish alignment, an impulse wave developed.
A bearish cross is the opposite of a bullish cross and it serves to suggest that the path of least resistance is geared towards lower prices, as bearish momentum is in control. Any time a bearish MACD indicator was generated, it correctly identified that a consolidation wave was set to develop.
The wave structure and indicators are in alignment to support an advance in NOK stock. From a trading standpoint, I would wait for a consolidation wave to develop before attempting to initiate a position, but this does not change the overall picture that higher prices are still likely to prevail.
The target for this advance can be attained by using the following Nokia stock chart, which illustrates a key level of overhead price resistance.
Chart courtesy of StockCharts.com
This NOK stock chart illustrates that a key level of price resistance currently sits in and around the $7.50 mark. Prior to falling below this level in 2011, this key level acted as a significant level of price support. This level of price support stood for approximately nine years before it was finally broken to the downside.
Since breaking below this level, there has been one attempt to break back above this key technical level, but unfortunately, that attempt was quickly thwarted. The level that was acting as a key level of price support is now acting as a key level of price resistance. This level of price resistance is a logical price objective for this rally, and from the current price, it represents a compelling 27% return.
The MACD indicator has just generated a bullish cross, which supports the idea of an advance. This indicator was generated using a monthly scale, so this bullish indication shouldn’t be taken lightly.
Bottom Line on Nokia Stock
I am bullish on Nokia stock because it has been trading with a bullish bias since late November 2016. Indications on the NOK stock chart continue to support an advance towards overhead resistance at $7.50.
I will remain bullish on Nokia Corporation as long as the indications on the price chart support this view.