PUMP Stock: All Set to Make a Run
I analyze a company by looking at its stock chart. The reason why I do this is because I believe that price is the best indication to suggest whether a stock has merits and is worth investing in. This method of investment analysis is called technical analysis (TA).
TA is based on the notion that historical price and volume data can be used to forecast future movements in a stock. This may sound like a preposterous idea, but I have been using and applying this method for the last two decades, and I will continue to do so because it works and has served me well.
I am very excited about the prospects of the next couple of months because, now that October is behind us, we have entered a seasonal period where stocks tend to outperform heading into year-end. That’s why this is a great time to look for stocks poised to make gains.
For instance, I believe Propetro Holding Corp (NYSE:PUMP) is now set to make a run toward higher stock prices. My beliefs are obviously all based on the price action that has developed on the ProPetro stock chart.
To be exact, I believe that PUMP stock is now set to appreciate because it has just completed a powerful technical price pattern that implies such an outcome.
The price pattern I am referring to is highlighted on the following stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the chart above is a descending triangle.
Descending triangles are price patterns that are characterized by a series of lower highs accompanied by a consistent and static low.
Connecting the peaks and troughs created by the price action is how I captured this pattern. The trend lines that capture this pattern are very important because they define the parameters of this pattern.
In order to complete the pattern, the stock needs to exit it. Then a powerful move is expected to follow. The reason why a powerful move is expected to follow is because triangle patterns are known for such outcomes.
The contraction of the range between the peaks and troughs as the pattern develops causes energy to build within the pattern. This stored energy will continue to accumulate until PUMP stock exits the pattern. Only then will the energy be released, which ultimately fuels the powerful move that is likely to follow.
That brings me to the reason I am currently focusing on ProPetro stock. On November 7, the stock exited the descending triangle, completing the pattern. This event is highlighted as a breakout on the chart above, and it is suggesting that a powerful move toward higher prices is now to be expected.
Knowing that higher stock prices are expected is one thing, but since triangles are also consolidation patterns that mark midpoints, I can also use the pattern to create a potential price objective for the move that is now expected to follow.
The only thing that is missing is the move that preceded the triangle, which is why I have provided the following chart.
Chart courtesy of StockCharts.com
This ProPetro stock chart contains the price action that preceded the descending triangle, and it has been subdivided into two distinct waves.
The wave highlighted in green is an impulse wave. It captures the stage in a bullish trend when a stock experiences a sustained move toward higher prices. The wave highlighted in purple is a consolidation wave. It captures the stage in a bullish trend when a stock experiences a correction.
These waves work together, creating the stair-step price action that bullish trends are so famous.
The completion of the descending triangle is suggesting that an impulse wave is now in development. Impulse waves have a tendency to mirror the impulse wave that preceded the consolidation wave. If I apply this notion to the price action on the PUMP stock chart, I can come up with a potential price objective.
The initial impulse wave was $11.75 in length. Adding this number to the base of the consolidation wave that was just completed suggests that $25.75 is a viable potential price objective for the impulse wave currently in development.
I am bullish on ProPetro stock because I believe that higher prices are on the horizon.
My bullish beliefs about PUMP stock are based on a completed technical price pattern, which is suggesting that such an outcome is now likely.