RDCM Stock: Expecting Fireworks Upon a Bullish Confirmation
I’ve got my eyes glued to the screen because RADCOM Ltd. (NASDAQ:RDCM) stock is on the verge of breaking out. A particular price pattern has been in development since October of last year, and a successful breakout would suggest that much higher RADCOM stock prices are likely to follow.
The price action on the RDCM stock is a work of art, and the convergence of support and resistance is a rare and beautiful site to see. I am waiting for a resolution of a wave structure, but I already have the bullish inclination to believe that the move in the stock price that follows is going to be a sight to behold. Just finding this particular setup pattern is a privilege because it marks the point where an appropriate investment strategy can be effectively applied.
A bullish trend consisting of higher highs and higher lows has been in development since 2009, which coincided with the conclusion of the financial crisis. This bullish trend is best identified by using a simple uptrend line. This simple uptrend line is created by connecting a number of significant lows that have followed since that day, which creates a beautiful 45-degree angle that spans from the lower left of the price chart and ends up in the upper right.
The most important aspect of every investment strategy is outlining and defining a level of risk, and the following RADCOM stock chart illustrates the metric I used to outline this level.
Chart courtesy of StockCharts.com
This uptrend line that defines this bullish advance has been in development for a little more than eight years, and every time this uptrend line had been tested, bullish investors have shown up in droves to support this metric.
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The significance surrounding this uptrend line is hard to refute, and it is why I am using it to define risk in RDCM stock. As long as the stock price remains above this metric, I can only assume that the bullish trend towards higher stock prices is set to continue. Trading below this metric would suggest that the bullish move towards higher stock prices has concluded, and would be a reason to exit any long positions in RADCOM stock.
This uptrend line defines a dynamic level of risk that will continue to adjust as time progresses. Think of it as a trailing stop loss.
Now that the most important factor, risk, has been defined, the following RADCOM stock chart illustrates the level that would act as a trigger to get long positions on this investment.
Chart courtesy of StockCharts.com
This RDCM stock chart illustrates a bullish alternating wave structure that is currently developing above the uptrend line that was highlighted earlier.
This alternating wave structure consists of two waves, an impulse wave and a consolidation wave. An impulse wave defines the stage in a bullish trend where the stock price stages a bullish advance. This wave is characterized by a swift and orderly appreciation in the stock price that exhibits little or no pullback.
This wave then gives way to a consolidation wave, which defines the stage in a bullish advance where the gains from the previous wave are digested. This wave is necessary to unwind any overbought conditions that were created during the price advance. This wave is characterized by the stock’s inability to stage an advance, but more importantly, this wave sets up the next impulse wave.
As soon as RADCOM closes above resistance outlined by the consolidation wave that sits at $22.35, it will serve to suggest that a new impulse wave is in development, and therefore higher stock prices are likely to follow. As a result, closing above $22.35 would act as a trigger to get long on RDCM stock, while breaking below the uptrend line highlighted on the first chart would act as an indication to exit this investment.
The uptrend line that was highlighted on the previous RADCOM stock chart currently coincides with the 200-day moving average, which is highlighted in red on this stock chart. The 200-day moving average, like the uptrend line, acts a dividing line that serves to suggest whether a stock is bullish or bearish. Trading above this moving average suggests that the investment is in a healthy bullish advance, while trading below it would suggest that the investment is in an unhealthy bearish decline.
The 200-day moving average was tested a handful of times this year, and every time this level was tested, investors were eager to step in and support the stock price. This moving average reinforces the importance of the price support outlined by the uptrend line. This investment’s inability to close below these metrics suggests that RDCM stock is geared towards higher prices, and a bullish breakout is only inches away from being confirmed.
Bottom Line on RADCOM Stock
I am watching a consolidation wave on the RADCOM stock chart that has been in development for nearly nine months. Once this stock price closes above $22.35, it would suggest that a bullish advance is in order and much higher RDCM stock prices are likely to follow. I am bullish, and will remain bullish on this investment, as long as the stock price remains above the uptrend line that I am using to define risk in this investment.