NUAN Stock: Bullish Until Further Notice
I am returning to shine the spotlight on Nuance Communications Inc. (NASDAQ:NUAN) stock because it has returned to test a previous level of price resistance. This level of price resistance was first breached on April 24, 2017, and it suggested that NUAN stock was set for an advance. This development was the focus of my publication, “The Surge in Nuance Stock Was No Surprise,” that was published on May 12, 2017. The bullish implications suggested by these developments were not without merits because Nuance Communications stock rallied by 14.29% before a correction finally ensued.
For anyone who hasn’t frequented any of my publications in the past, it is worthwhile to note that my views on a potential investment are generated by analyzing the company’s stock chart. This method of investment analysis is called technical analysis, and it is predicated on using historical price and volume data to project where the stock price is heading next.
I am focusing on Nuance Communications stock because in order to sustain the bullish stature that was first suggested on April 24, 2017, the stock price must not close below the level of resistance that first suggested a bullish view was warranted.
The following price chart illustrates the important price point that NUAN stock is currently testing.
Chart courtesy of StockCharts.com
This NUAN stock chart illustrates the important level of price resistance that I have been referring to.
This level of resistance was first met on June 8, 2016, where the share price stalled at $17.65. A considerable sell-off quickly ensued, and the share price slid by 23.2% before it was finally able to find its footing.
A significant rally was spurred by the conclusion of the presidential election, and in a matter of weeks, Nuance Communications stock appreciated by 29.99%, before the price stalled at $17.47. This was the second time that the stock price stalled at this level, and as a result, a significant level of price resistance was officially established at this level.
In February of this year, Nuance shares quietly, but surely, returned to test this level of resistance once again. This time around, the share price just loomed underneath resistance until late April, when the stock price was finally able to clear this stubborn level of price resistance.
A spectacular rally ensued that saw the stock price appreciate to the tune of 14.29% before the stock price began to sell off. This sell-off has returned to test the significant level of price resistance from above. This type of price action is quite common and I refer to this price action as a “backtest.” The backtest serves to reaffirm that breaking above the resistance level was legitimate, while simultaneously establishing the previous level of resistance as a new level of price support.
If the bullish implications that were suggested by breaking above resistance are still intact, then the NUAN stock price needs to retain its footing above this significant price point, and not trade below it.
The following Nuance Communications stock chart illustrates that the backdrop remains bullish, which increases the odds that the bullish implications suggested by the break above resistance are still intact.
Chart courtesy of StockCharts.com
The focus of this NUAN stock chart is the moving average convergence/divergence (MACD) indicator located in the lower panel. MACD is a simple and effective tool that is used to determine whether bullish or bearish momentum is influencing the trading action in a particular investment.
A bullish MACD cross suggests that bullish momentum is driving the trading action, while a bearish MACD cross suggests that bearish momentum is driving the trading action. Distinguishing between these two polar opposites is determined by the crossing of a signal line.
The stock chart illustrates that when a bullish cross is generated, Nuance Communications stock has a tendency to appreciate, while a bearish cross has a tendency to see NUAN stock depreciate.
A bullish cross was generated in February of this year and it is suggesting that bullish momentum is driving this investment. Therefore, the path of least resistance is geared towards a higher stock price. This bullish indication creates a bullish backdrop that supports the notion of a higher Nuance Communications stock price and reaffirms the bullish posture suggested by breaking above resistance.
Bottom Line on Nuance Communications Stock
Nuance Communications stock has returned to test a previous level of resistance that initiated a bullish view on this investment when it surpassed this level in the first place. In order to maintain a bullish view on NUAN stock, it needs to maintain its stature above this significant price point.