RadNet Stock Is Up 43.50% in 5 Weeks, Is More to Come?

RDNT Stock
Credit:iStock.com/max_carpenter

RDNT Stock: Further Gains Are Expected

It was only five weeks ago that I covered RadNet Inc. (NASDAQ:RDNT) stock. In the publication, titled “RadNet Stock Is All Set for an Epic Advance,” I outlined that a number of developments on the RDNT stock chart suggested that RadNet stock was primed for a run towards higher stock prices.

It is safe to say that the epic advance I was anticipating played out a little better than I originally expected because Radnet stock appreciated to the tune of 43.5% over that time frame. I originally laid out a preliminary target of $10.65, and RDNT stock blew right through that metric without skipping a beat.

You may be wondering how I came to the conclusion that this investment was set to move. Well, the answer is quite simple. I use a method of investment analysis known as technical analysis. This method of analysis is predicated on using price and volume indicators to forecast where the stock is heading.

The pattern that suggested an epic run was on the horizon is illustrated on the following RadNet stock chart.

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RadNet stock chart

Chart courtesy of StockCharts.com

The “cup and handle” price pattern that is highlighted on this RDNT stock chart is the reason why I believed that a run towards higher prices was likely.

This pattern is created when a stock comes across a significant level of price resistance that it cannot break above on the first or second attempts. These attempts create two distinct troughs, where the first trough is much larger than the second.

The price action centered around this significant level of price resistance creates the lovely teacup pattern, which is highlighted in pink on the stock chart.

On August 7, RadNet stock broke above this level of resistance, which indicated that the cup and handle pattern was complete. A completed cup and handle price pattern implies that higher stock prices are on the horizon.

If the suggestion of higher stock prices wasn’t good enough, this pattern also generates a potential price objective. Generating this objective is not a difficult task; it involves taking the depth of the cup and extrapolating that value above the level of resistance. This is how the $10.65 price objective that I mentioned earlier was generated.

I mentioned in the previous publication that this price objective was extraordinary because it would serve to complete a much larger wave structure, implying further gains.

The following RadNet stock chart illustrates the wave structure that was completed when the stock price sliced through $10.65.

RadNet price chart

Chart courtesy of StockCharts.com

This Radnet stock chart highlights the wave structure know as constructive price action, which consists of impulse waves and consolidation waves.

The impulse wave, highlighted in green, defines the stage in a bullish advance where the stock price appreciates in swift and linear price motion.

The consolidation wave, highlighted in purple, defines the stage in a bullish advance where any overbought conditions that were created during the previous impulse wave are unwound in order to create the necessary environment for a new impulse wave to develop.

These waves feed off each other, and in an alternating wave structure, they create the necessary framework so a bullish trend can develop and flourish.

The breakout that is highlighted on the stock chart implies that the consolidation wave is now complete and a new impulse wave is now in development. The moving average convergence/divergence (MACD) indicator is reinforcing this bullish notion.

MACD is a trend-following momentum indicator that used to distinguish between bullish and bearish momentum. This indicator has the propensity to correctly confirm which wave is in development.

In March 2014, a bullish MACD cross was generated, indicating that bullish momentum was influencing the stock price. While this indicator was in bullish alignment, the RDNT stock price appreciated to the tune of 225%, confirming that an impulse wave was in development.

In June 2015, a bearish MACD cross was generated, indicating that bearish momentum was influencing the stock price. While this indicator was in bearish alignment, RadNet stock failed to stage an advance, confirming that a consolidation wave was in development.

In May of this year, a bullish MACD cross was generated and it has been instrumental in fueling the current advance. Like the indications that came before it, it is suggesting that bullish momentum is once again influencing the stock price, which confirms the notion that an impulse wave is now in development.

Analyst Take: 

A confluence of indications that were generated on the RDNT stock chart continue to support the notion that higher RadNet stock prices are on the horizon.