This RDCM Stock Pattern Speaks Volumes
Maintaining a bullish bias in this stock market environment has not been easy. Perhaps I am a fool for even trying, because these markets have been plagued by wild swings and elevated levels of volatility. The path of least resistance has been geared toward lower prices.
The main reason I continue to carry a bullish bias is that I have yet to come across any glaring indications suggesting that the current market weakness is anything but a correction.
Supporting this correction thesis is the fact that the markets continue to bounce off very important levels of price support. As long as the markets remain pitched above price support, I can only assume that a bull market is still in development.
In times of duress like this, I prefer to stick with stock charts that are pristine and easy to discern, which is why I am currently watching RADCOM Ltd. (NASDAQ:RDCM).
The RADCOM stock chart contains a very compelling technical price pattern, and the next sustained move is predicated on the resolution of this pattern.
This technical price pattern is highlighted on the following RDCM stock chart.
Chart courtesy of StockCharts.com
The above chart illustrates a technical pattern known as a price channel.
This pattern is defined by a static level of price resistance that resides at $22.00 and a static level of price support that resides at $17.00.
These static levels of price support and resistance have contained the RADCOM stock price since September 2017, after resistance was first established.
Since that date, RDCM stock has been oscillating between these levels of price support and resistance. This will continue until the price either breaks above resistance or falls below support. Then a reaction will follow.
The size and scope of the reaction that follows is directly related to the size and scope of the pattern. This pattern has been in development since September 2016, and the price channel has become quite evident.
Patterns that are easy to identify have a tendency to draw attention from traders. These traders are likely to position themselves on either side of support and resistance, in anticipation of a possible breakout.
The more participants, the larger the reaction that can be expected to follow. The longer the pattern is in development, the higher the number of participants that can be expected to become involved.
This is why larger and longer patterns have equally large and long reactions.
I have the inclination to believe that this price channel will resolve itself in a bullish manner by breaking above price resistance. That would result in higher RDCM stock prices.
My bullish beliefs are based on the fact that this price channel has been developing within a bullish trend.
This bullish trend is highlighted on the following RADCOM stock chart.
Chart courtesy of StockCharts.com
This RDCM stock chart illustrates that, for the better part of four years, this investment has been traveling from the lower left to the upper right, in a pattern that resembles a staircase.
The staircase pattern consists of a series of higher highs and higher lows, which is the quintessential characteristic of a bullish trend.
The bullish trend is captured by using the simple uptrend line, which was created by connecting the series of higher lows that characterized the bullish trend.
This uptrend line is very significant, and the sheer number of times it has been tested is a testament to this notion.
I can easily assume that, as long as RADCOM stock is trading above the uptrend line, a bull market remains in development.
The idea of a bull market being in development will only be negated if the RDCM stock price breaks below the uptrend line.
The price channel is developing in the context of a bull market, which increases the odds that the pattern will resolve itself in a bullish manner.
This is being magnified by the fact that this uptrend line was tested twice this year, and RADCOM stock continues to stay pitched above it.
If a stock cannot trade lower, it will likely trade higher, which is why resistance is likely to be tested in the near future.
A confirmed close above resistance at $22.00 will confirm my beliefs, at which time I will fully expect higher RDCM stock prices to follow.
I am watching the development of a technical price pattern on the RADCOM stock chart. This pattern will determine whether the stock is likely to sustain a move toward higher or lower prices.
At the current juncture, I have the inclination to believe that this pattern will result in higher RDCM stock prices. These beliefs will only be confirmed once the stock price breaks above resistance at $22.00 on a sustained basis.