RDNT Stock: The Fuse Is Lit, and Fireworks Can Be Expected
It brings me great pleasure to provide my views on RadNet Inc. (NASDAQ:RDNT) stock. As of late, I have been enamored with the healthcare space because the stocks within it have begun to stage bull market advances, and RadNet stock is no exception.
This small-cap healthcare stock, a leading provider of outpatient diagnostic imaging services, continues to make strides in this segment. When it reported earnings on August 8, the numbers were outstanding; the report was highlighted with record revenues and earnings.
What makes RDNT stock so special is that its stock chart is a wonderful spectacle. As my frequent readers are well aware, my views on an investment are strictly based on the indicators that are generated on the company’s stock chart. This method of investment analysis is known as technical analysis, and I have been using it for nearly two decades to generate investment strategies.
The following RadNet stock chart illustrates a technical price pattern that is worth getting excited about.
Chart courtesy of StockCharts.com
This RDNT stock chart has been highlighted in order illustrate the “cup and handle” price pattern that has been painted on it.
This pattern is identified by its two distinct troughs, and the first trough is much larger than the second. These troughs are created as a result of a significant level of price resistance that thwarted previous attempts to move beyond it.
These two troughs have created a wonderful pink teacup shape. This pattern was completed on August 7, when RDNT stock finally mustered enough strength to break above the resistance level. This pattern is now suggesting that higher prices are on the horizon. If this wasn’t good enough, the pattern also establishes a potential price objective.
In order to generate a potential price objective using the cup and handle price pattern, it is necessary to take the depth of the cup and extrapolate that value above the significant level of resistance. This produces a potential price objective of $10.65.
What makes this price objective extraordinary is that it serves to complete a much larger wave structure, suggesting that even higher prices are likely to ensue.
The following RadNet stock chart illustrates a large wave structure that has been in development for approximately four years.
Chart courtesy of StockCharts.com
The large wave structure that is highlighted on the RDNT stock chart constitutes constructive price action, and it consists of an impulse wave and a consolidation wave.
The impulse wave, highlighted in green, shows the progression of the price, and is characterized by a swift and linear price advance.
The consolidation wave, highlighted in purple, serves to unwind any overbought conditions that were created during the previous impulse wave. Unwinding an overbought condition creates the necessary environment for a new impulse wave to develop.
The impulse and the consolidation waves feed off each other and, therefore, in an alternating wave structure, these waves create the necessary building blocks so a trend can remain stable and sustainable.
A breakout above the consolidation wave will serve to suggest that an impulse wave is in development. The price objective of $10.65 suggested by the cup and handle pattern is just above resistance outlined by the consolidation wave, suggesting that a breakout is on the horizon.
The moving average convergence/divergence (MACD) indicator is also suggesting a similar outcome. MACD is a momentum indicator that uses the crossing of a signal line to distinguish between bullish and bearish momentum. Momentum is what drives the stock price. It’s imperative to trade in the direction suggested by this indicator because it paves the path of least resistance.
For instance, in March 2014, a bullish MACD cross was generated, which indicated that bullish momentum was influencing RadNet stock prices. While this indicator was engaged, the stock price appreciated by 225% before a bearish MACD cross was generated, indicating that both the price advance and the impulse wave were complete.
The bearish cross that was generated in June 2015 confirmed that a consolidation wave was in development. While this bearish momentum indicator was engaged, RadNet stock failed to stage a price advance.
This brings us to today. A bullish cross, which was generated in May, is currently engaged. This indicator serves to suggest that bullish momentum is once again influencing the trading action, and that higher stock prices should be expected. This indication increases the odds that RDNT stock will exit the consolidation wave in an upward direction and a new impulse wave will follow.
Bottom Line on RadNet Stock
A technical price pattern was just completed on the RadNet stock chart, which suggests that higher stock prices are likely, supporting a bullish view. What is really exciting about this price pattern is that it produces a potential price objective that will complete a much larger wave structure, suggesting that a substantially large rally in RDNT stock is on the horizon.