ON Stock: Looking for an Explosive Move
ON Semiconductor Corp (NASDAQ:ON) stock is testing its 52-week high, and it’s on the verge of breaking through. Such a feat would open up the door to much higher ON Semiconductor stock prices because of the multitude of implications such a feat carries. I have the inclination to believe that the ON stock price is set to accelerate once this level of resistance is finally breached, so I am watching this level with a keen eye and am quite excited to see the magnitude that will follow.
This bullish inclination towards this investment is not something new. I have been bullish on ON Semiconductor stock since it completed a very large technical price pattern earlier this year. This price pattern and its implications are what is driving the predominant direction that ON stock is currently trading in. Given that the general market environment for stocks as an asset class is very bullish at the moment, it only serves to support any bullish moves that this investment is set to make.
The technical price pattern highlighted on the price chart above is an ascending triangle. This technical price pattern is identified using two trend lines. The trend line that represents support is created by connecting the lows on the price chart, while the trend line representing resistance is created by using a horizontal level of price resistance that has been serving to contain the price since 2007.
The following ON Semiconductor stock chart illustrates the completed technical price pattern that has created a bullish backdrop for this investment.
Chart courtesy of StockCharts.com
Triangles are very powerful price patterns, and this is a result of this pattern’s ability to build and store momentum as it develops. The development of this pattern is characterized by a contraction of space between support and resistance. This contraction of space causes momentum to build within the pattern, which will eventually be released when the stock price breaks above resistance or below support. The size and scope of this pattern is directly related to the size of the reaction that is expected to occur once the pattern is resolved. This pattern has been in development for over a decade, and therefore, a very large reaction is expected to follow.
This resolution of this triangle came about in March 2017, when ON stock managed to break above resistance. This feat suggested that the predominant trend was to the upside and that a very large move is now in the making.
This move towards higher price is predicated on ON stock’s ability to breach the previous 52-week high that was set in February of this year. This feat is now only moments away, and it will serve to complete the price action that is illustrated on the following ON Semiconductor stock chart.
Chart courtesy of StockCharts.com
The price action depicted on the price chart above is known as constructive price action. Constructive price action consists of a two-wave structure, where each wave feeds off the other in order to create a sustainable trend.
The first wave of this two-wave structure is an impulse wave. The function of this wave is the advancement of the stock price in a linear motion. Once this wave is complete, the second wave, a consolidation wave, begins to develop. The function of this wave is to create the necessary conditions for a new impulse wave to develop. These necessary conditions are created when the stock price trades in a range that unwinds any overbought conditions that were created in the preceding advance.
A new 52-week high will complete the current consolidation wave that is in development, suggesting that a new impulse wave is set to develop. This new potential impulse wave is being reinforced by the moving average convergence/divergence (MACD) indicator located in the lower panel of the chart above.
MACD is a momentum indicator that is used to distinguish between bullish and bearish momentum. A bullish signal was generated in May 2017, when the signal lines crossed, suggesting that bullish momentum was influencing this investment. Bullish momentum creates an environment where the path of least resistance for the stock price is geared towards higher prices.
A new impulse wave will mark the first time an impulse wave has developed outside of the ascending triangle. If the explosive move suggested by the ascending triangle is going to play out, this is where it is going to show its face. This is why I am extremely excited to see the outcome that follows, once this new high is finally forged.
Bottom Line on ON Semiconductor Stock
ON Semiconductor stock is on the verge of creating a new high that will complete a technical pattern, suggesting that an advance is set to take place. This advance will mark the first time an impulse wave has developed outside this large technical price pattern that instilled the bullish view in the first place. If the bullish repercussions surrounding ON stock are going to occur, it will begin with this move.