ON Stock: All Set for an Advance
ON Semiconductor Corp (NASDAQ:ON) stock is a play on the semiconductor sector, which has proven to be very rewarding for investors over the past 17 months. I am currently focusing on a number of stocks in this sector because I have the inclination to believe that the run towards higher stock prices is far from over. ON Semiconductor stock is one of my favorite stocks in this space and I have been waiting for this company to stage a bullish advance since I first stumbled upon this name on September 26, 2016.
ON stock has sold off in recent weeks, and in this process, the stock price has returned to test a number of very important metrics. Testing these metrics, and remaining above them, is an indication that bulls remain in control, and the bullish move I am waiting for may now be in the process of coming to fruition.
This ON stock chart illustrates that a very large technical price pattern was in development for nearly one-and-a-half decades. This price pattern is a very large ascending triangle that is defined using two trend lines. One trend line is horizontal and represents resistance while the other trend line is upward-sloping and represents support.
The following ON Semiconductor stock chart illustrates the development that first initiated my bullish view on this investment.
Chart courtesy of StockCharts.com
For anyone who has not read any of my previous publications, I am quite enamored with triangle price patterns because they are particularly powerful patterns. The power generated by this pattern is a result of momentum being stored within the pattern as it develops. Larger patterns are expected to produce especially large reactions, and that is why I am particularly bullish on ON stock.
This pattern was completed in February of this year, when ON Semiconductor stock exited the price pattern by breaking above the horizontal trend line that was acting as a level of price resistance. This completed technical price pattern carries tremendous bullish implications, and it is why I am expecting a serious move to develop.
Since becoming bullish on this investment, ON stock did stage a small advance, but the big move I have been waiting for has yet to develop. The recent sell-off may be that catalyst that was needed because ON Semiconductor stock has returned to test the horizontal level of resistance that initiated my bullish view in the first place.
Returning to test a previous level of resistance from above is known as a “backtest” and this type of price action serves to reinforce that the break above resistance was legitimate, while simultaneously establishing this as a new level of price support.
I mentioned earlier that the recent price weakness served to test a number of metrics, and the following ON Semiconductor stock chart illustrates these metrics.
Chart courtesy of StockCharts.com
This ON stock chart focused on the bullish advance that completed the ascending triangle. This bullish advance started in February 2016, and was followed by a series of higher highs and higher lows, which is the quintessential characteristic that defines a bullish trend.
This bullish trend is easily defined by using an uptrend line. This uptrend line is created by connecting the significant lows that have occurred since this bullish trend has been in development. This uptrend line has become a line in the sand that acts as a dividing line between this investment’s current bullish trend and a potentially bearish one. Using it as tool is just as easy as it was to create because as long as the stock price is above this trend line, it is safe to assume that the bullish trend is set to continue.
This uptrend line currently coincides with the 200-day moving average. The 200-day moving average is a metric that is used to measure whether an investment is in a bullish state or a bearish state. Distinguishing between the two is quite simple because if the stock price is above the 200-day moving average, the investment is deemed healthy and bullish. Trading below it suggests that the investment is unhealthy and bearish.
Bottom Line on ON Semiconductor Stock
The recent sell-off in ON Semiconductor stock was halted in its tracks when it tested these coinciding metrics that suggest that this investment is still in a healthy and bullish state and the resulting price rally should come as no surprise. If ON stock is ever going to stage the advance that I am anticipating, it is likely going to occur from this point going forward.