RADCOM Stock Continues to Inch Towards an Explosive Breakout

RDCM stock
Credits:istock.com/Peshkova

RDCM Stock: The Waiting Game

I have been patiently watching RADCOM Ltd. (NASDAQ:RDCM) stock since March of this year because a very compelling technical price pattern is being painted on the RDCM stock chart. I have been waiting for this pattern to resolve itself, but instead, it continues to spool. With each and every day, the pattern gets larger, and with it, the repercussions when the pattern is finally resolved continue to magnify.

Eventually, this pattern will be resolved, and it will bring upon an explosive move in RADCOM stock when it does.

The following stock chart illustrates the technical price pattern that continues to spool.

RDCM stock chart

Chart courtesy of StockCharts.com 

This RDCM stock chart has been annotated in order to highlight constructive price action. Constructive price action consists of impulse waves and consolidation waves. These waves, in an alternating wave structure, are responsible for creating and sustaining a trend.

The impulse wave is highlighted in green and it defines the period in a bullish trend where the stock price stages an advance towards higher stock prices.

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The consolidation wave is highlighted in purple and it defines the period in a bullish trend where a stock price correction ensues. The function of this correction is to unwind overbought conditions that were created in the impulse wave that preceded it. This process creates the necessary conditions so a new impulse wave can develop.

RADCOM stock has been spooling inside a very large consolidation wave for almost a year now. This wave is bound by resistance at $22.50, and support at $16.65. This wave will be resolved when RDCM stock either breaks above resistance or below support. This action will dictate the direction that the stock is heading in next.

My inclination is tilted towards a bullish resolution of this price pattern because there are a number of indications that continue to support the notion that a bull market is still in development.

The first indication is that the wave structure is constructive, which can be interpreted as bullish.

The second indication was generated in August 2016, when the faster 50-day moving average (highlighted in blue) crossed above the slower 200-day moving average (highlighted in red). This signal is referred to as a golden cross, and it used by the trading community to suggest that a bull market is in development.

The bullish cross was generated shortly after the impulse waves began, and 13 months after it was generated, it still remains in bullish alignment, supporting the notion that a bull market is still in development.

The third indication is illustrated on the following Radcom stock chart.

Chart courtesy of StockCharts.com 

This RDCM stock chart illustrates that since the conclusion of the financial crisis in 2009, this investment has traveled from the lower left of the price chart to the upper right. This staircase pattern, which contains a series of higher highs and higher lows, is a quintessential characteristic that defines a bullish trend.

This bullish trend is captured using the simple uptrend line that is created by connecting the series of higher lows. This uptrend line has been in development for almost nine years, and the number of times it has been tested is a testament to its significance.

With this in mind, I can easily assume that as long as Radcom stock is trading above the uptrend line, the bull market in the stock is still in development. Breaking below this uptrend line, on the other hand, would suggest that the bull market that began in 2009 has run its course.

The consolidation wave is currently developing right on top of this uptrend line, and as long as it stays above it, I will the have the inclination to believe that the pattern will resolve itself in a bullish manner, and an explosive move towards higher stock prices will follow.

I am anticipating a break above $22.50, and I will wait for a confirmed close above this level to indicate that higher RADCOM stock prices are on the horizon.

Analyst Take:

 RADCOM stock is trading within a very large technical price pattern that has been in development for almost a year. The resolution of this pattern will determine whether RDCM stock is set to appreciate or depreciate. At this current juncture, I am inclined to believe that the pattern will resolve itself in a bullish manner based on a number of indications that continue to support the notion that a bull market is still in development.