RDNT Stock: Bullish Momentum Is Now Influencing the Stock Price
Wow, the Nasdaq has just hit a new all-time high, completely shrugging off the market weakness that plagued the index earlier this year. Who would have thought such a development would occur? Well, I did, but let’s leave my gloating for another time.
The healthcare and biotechnology sector has been outperforming this year, and it has been among the sectors responsible for pushing the Nasdaq to new highs.
So, rightfully so, I am focusing on a compelling stock in this space. RadNet Inc. (NASDAQ:RDNT) stock has been a standout performer, up 24.95% year-to-date. I believe that his level of outperformance is only the beginning and that much higher RDNT stock prices are on the horizon.
Before I tell you why, let me point out that this is not my first time focusing on RadNet stock. On August 10, 2017, I published a report titled “RadNet Stock Is All Set for an Epic Advance.” In this publication, I outlined that a completed technical price pattern was suggesting that higher prices were on the horizon. This completed pattern did not disappoint because, over the course of the next five weeks, RDNT stock surged by 48.75%, proving the merits of this technical price pattern.
So you can imagine my excitement when I realized that a similar pattern has just been completed, and this time, it’s on a much, much bigger scale.
This completed technical price pattern is highlighted on the following RadNet stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the RDNT stock chart is a cup and handle price pattern.
Cup and handle price patterns are characterized by two distinct troughs, and the first trough is much larger than the second. These troughs are created because a significant level of price resistance prevented the stock price from advancing. On the RDNT stock chart, this significant level of price resistance resided at $9.50 and it was first established in October 2007.
This is a very large pattern, to say the least; it has been 10 years in the making and was finally completed in August 2017, when RadNet stock finally gathered enough strength to break above resistance.
The size of the pattern is directly related to the size of the move that is now expected to follow. From a linear standpoint, a price objective can be obtained by taking the depth of the cup and extrapolating that value using the significant level of price resistance as a base. The linear standpoint produces a viable price objective of $19.00, which suggests that RadNet stock can run another 50.55%.
Even though the pattern was completed in August 2017, RDNT stock did not explode to the upside. However, the price action that followed has been very instrumental in creating the necessary conditions for RadNet stock to sustain an accelerated move toward higher prices.
The price action and an influential momentum indicator that is currently supporting RadNet stock are highlighted on the following chart.
Chart courtesy of StockCharts.com
This stock chart illustrates that RDNT stock broke above resistance in the last week of August 2017 and, after peaking at $11.80, RadNet stock has come back to test this infamous level of price resistance from above.
Testing a previous level of resistance from above is very common, and the practice is known as a backtest. A backtest serves to reaffirm that the break above resistance was legitimate, while simultaneously establishing it as a new significant level of price support.
Backtests act like springboards and, once they are completed, they are known to produce accelerated moves toward higher prices. In order to create the necessary conditions for such a move, the moving average convergence/divergence (MACD) indicator needs to be in bullish alignment.
The MACD indicator distinguishes whether bullish or bearish momentum is influencing the trading action in a stock. This indicator is very influential because a stock in a bullish trend cannot sustain a move toward higher prices unless bullish momentum is supporting.
When RadNet was backtesting the significant level of price resistance, the MACD indicator was in bearish alignment. Only when a bullish MACD cross was generated in the first week of March did the stock price begin its accelerated move to the upside.
Now that bullish momentum is influencing the trading action once again, the repercussions implied by the extremely large cup and handle price pattern are now in play. As a result, much higher RadNet stock prices are now in development.
The completion of a very large technical price pattern and an influential momentum indicator, which is now in bullish alignment, are suggesting that RadNet stock is poised to make an accelerated move toward higher prices. I will maintain this bullish view on RDNT stock as long as these indications continue to support it.