NTNX Stock: Explosive Upside Potential
I am focusing on Nutanix Inc (NASDAQ: NTNX) stock because I have a compelling reason to believe that higher NTNX stock prices are on the horizon. This belief is centered around two factors.
The first factor is based on the Nutanix stock chart, where recent developments are suggesting that higher stock prices are now on the horizon. The second factor is that the short position on this investment—as of September 29—sat at 16.39 million shares, which equates to 21.09% of the float.
My bullish view was generated by analyzing the company’s stock chart. This method of investment research is called technical analysis, and I have been using it for roughly two decades to generate trading and investment strategies.
The second factor is predicated on the notion of higher stock prices that can potentially create a short squeeze, which will help fuel and propel an advance.
The second factor is contingent on this first factor, which assumes that higher stock prices are on the horizon—a scenario that is currently being suggested by the company’s stock chart.
The following stock chart illustrates the developments that are currently suggesting that higher NTNX stock prices are on the horizon.
Chart courtesy of StockCharts.com
The development I am referring to comes in the form of a technical price pattern known as a “cup and handle,” which I have highlighted on the above stock chart.
This pattern is product of a significant level of price resistance that acted to thwart previous attempts at moving beyond it. This level of price resistance was first established on March 3, 2017, following a disappointing earnings report that caused the NTNX stock price to gap lower by 18%.
The next couple of attempts at breaching this price point created two distinct troughs, which are the characteristics of a cup and handle price pattern.
This cup and handle pattern was completed on October 10, when Nutanix stock finally mustered up enough strength to break above the significant level of price resistance that thwarted previous attempts to move beyond it. This completed pattern is the indication which is currently suggesting that higher stock prices are on the horizon.
Technical price patterns such as this one are beneficial on many fronts. Aside from just suggesting that higher stock prices are on the horizon, they can be used to produce a potential price objective. This price objective is created by taking the depth of the largest trough and extrapolating that value above the significant level of price resistance. This method suggests that $35.00 is a plausible price objective.
The view that higher NTNX stock prices are on their way is supported by another indication, which is highlighted on the following Nutanix stock chart.
Chart courtesy of StockCharts.com
The indication highlighted on this stock chart is a golden cross. This kind of pattern is created when the faster 50-day moving average (highlighted in blue) crosses above the slower 200-day moving average (highlighted in red).
A golden cross is a bullish indication that is popular among traders and investment professionals because it suggests that a bull market is developing. The timing surrounding this bullish signal coincided perfectly with the completion of the cup and handle pattern. Coinciding indications reaffirm one another and increase the odds that the bullish implications will play out.
Now that I have outlined why I think higher stock prices are on the horizon, it is time to return to the factor that could send this investment rushing to higher stock prices.
Nutanix stock has a very large percentage of its share float that is short. This means that investors have taken a bearish position by selling shares with the anticipation of buying them back at lower prices. If we assume that higher prices are on the horizon, these investors will want to—or will be forced to—cover their positions by buying them back when the NTNX stock price starts to advance.
A short squeeze could send NTNX stock surging higher, and higher prices will place further pressure on the remaining short positions. The necessary ingredients are in place for an epic move toward higher stock prices, taking it beyond the $35.00 price objective.
I am bullish on Nutanix stock because there are a number of indications on the stock charts which are suggesting that a bull market is in development, and that, therefore, a higher stock price can be expected.
This dynamic creates a special circumstance because short interest in NTNX stock is high, and it increases the odds that, if a bullish advance does develop, a short covering rally could ignite a spectacular rally toward higher stock prices.