PCRX Stock: Anticipating the Next Sustained Move
The pharmaceutical and biotechnology stocks continue to outperform in this current market environment, and there is little to suggest that these sectors will not continue to delight investors.
I have chosen to focus on Pacira Pharmaceuticals Inc (NASDAQ:PCRX) stock because I believe the pharmaceutical stock is setting up to make a move toward much higher PCRX stock prices.
The setup I speak of is based on the technical price pattern highlighted on the following Pacira Pharmaceuticals stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the PCRX stock chart is a falling wedge.
The falling wedge price pattern falls within the triangle family. The main difference between this pattern and other triangles is that it is characterized by price action containing a series of lower highs and lowers lows.
In essence, this describes the quintessential characteristic of a bearish trend. It is only when we connect the peaks and troughs created by this price action that a falling wedge emerges.
These trend lines are very important because they not only capture the pattern but also define where significant levels of price support and price resistance reside. This is important information because this pattern will only reach a resolution once Pacira Pharmaceuticals stock is finally able to escape it by breaking above price resistance or below price support.
Like triangle patterns, the trend lines that define this pattern are converging in nature. As a result, the longer the pattern is in development, the smaller the range between price support and price resistance becomes.
This convergence of space between support and resistance causes energy to build within the pattern. This energy will only be released when PCRX stock price escapes the pattern. Then, a powerful move is expected to follow.
Pacira Pharmaceuticals stock is currently testing resistance outlined by the falling wedge. Breaking above it will complete this pattern, suggesting that higher PCRX stock prices are likely to follow.
The implications of such an event are magnified because the falling wedge also doubles as a consolidation wave.
The following Pacira Pharmaceuticals stock chart captures the wave structure that this consolidation wave is an instrumental part of.
Chart courtesy of StockCharts.com
This PCRX stock chart highlights a wave structure containing impulse waves and consolidation waves. These waves are responsible for creating and sustaining a bullish trend.
The wave highlighted in green is an impulse wave. These waves are advancing in nature. As a result, they capture the stage in a bullish trend when a stock sustains a progressive move toward higher prices.
The wave highlighted in purple is a consolidation wave. These waves are corrective in nature. As a result, they capture the stage in a bullish trend when a stock corrects and refrains from advancing.
These waves feed off each other, creating the stair-step price action that bullish trends are so famous for.
As I mentioned earlier, the falling wedge doubles as a consolidation wave. When it is completed, an impulse wave is likely to follow. The direction this impulse wave takes will depend on whether the consolidation wave is resolved in a bullish or bearish manner.
I have the inclination to believe that the consolidation wave currently in development will be resolved in a bullish manner because the moving average convergence/divergence (MACD) indicator is currently suggesting that the path of least resistance is geared toward higher Pacira Pharmaceuticals stock prices.
MACD is a trend-following momentum indicator that uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices. Bearish momentum implies that a stock is geared toward lower prices.
Momentum is a very powerful force, which is why a sustained move in either direction cannot occur unless the applicable level of momentum is supporting it. This is why the waves responsible for creating and sustaining a bullish trend have coincided with the signals generated by the MACD indicator.
In March 2017, the MACD indicator swung into bullish alignment, suggesting that PCRX stock is geared toward higher prices. As long as this indicator remains in bullish alignment, it increases the odds that the consolidation wave will be resolved in a bullish manner and higher Pacira Pharmaceuticals stock prices, via an impulse wave, will follow.
I am watching the development of a technical price pattern on the Pacira Pharmaceuticals stock chart because its completion will determine whether the next sustained move will be geared toward higher or lower stock prices.
I am leaning toward a bullish outcome because a very influential momentum indicator is currently suggesting that PCRX stock is geared toward higher prices.