ST Stock: The Technicals Continue to Support Further Gains
I am focusing on Sensata Technologies Holding N.V. (NYSE:ST) stock and that reason should really come as no surprise. Like many of my publications that have come before it, the reason why I am focusing on Sensata stock is that I find the ST stock chart compelling. A compelling stock chart gives enough indications to imply where the stock price is heading next. Therefore, generating views on this investment becomes a straightforward task.
If you have never frequented my publications before, let me quickly explain the method of investment analysis I use to generate my views. This method is called technical analysis and it is based on the notion that stocks have embedded trends and, therefore, historical data can be used to speculate the direction the stock is heading in. I have spent nearly two decades studying and applying this method of investment analysis and I feel comfortable putting my skills to work on the ST stock chart.
The following stock chart illustrates the bullish trend currently supporting this investment.
Chart courtesy of StockCharts.com
The Sensata stock chart illustrates that since February 2016, this investment has been in a bullish trend characterized by the quintessential feature that defines all bullish trends, which is a series of higher highs and higher lows.
This bullish trend is captured using a simple uptrend line that was created by connecting the series of higher lows. This uptrend line defines the bullish trend, and it also acts like a level of price support. This trend line has numerous points of contact that make it significant. As long as ST stock is trading above it, I can only assume that the bullish trend that began in February 2016 is still intact and, therefore, higher prices will prevail.
In September 2016, a golden cross was generated and it substantiated this bullish trend. A golden cross is an indication that is produced when the faster 50-day moving average (highlighted in blue), crosses above the slower 200-day moving average (highlighted in red). A golden cross is a popular signal that indicates that a bull market is in development.
ST stock is trading above both moving averages that created the golden cross, and, therefore, these moving averages are—and remain—in bullish alignment. This suggests that the indication is still intact and the bull market is still in development.
These indications were further substantiated by the indication highlighted on the following stock chart.
Chart courtesy of StockCharts.com
The focus of this price chart is the moving average convergence/divergence (MACD) indicator located in the lower panel.
MACD is a momentum indicator that uses the crossing of a signal line in order to distinguish whether bullish or bearish momentum is influencing the price action in a stock.
A stock cannot make a sustained move toward higher or lower prices without the applicable momentum. Bullish momentum suggests that the stock is geared toward higher prices, while bearish momentum suggests that the stock is geared toward lower prices. Knowing which one is dominating the trading action is very valuable data.
For instance, in July 2015, a bearish MACD cross was generated, indicating that bearish momentum was influencing the price action in Sensata stock. The value and significance of this indication did not disappoint because the share proceeded to sell off, and ST stock did not find its footing until February 2016, after shedding 38.78% in value.
A bullish was cross was generated in January of this year, and it is suggesting that bullish momentum is paving a road toward higher prices. Since this indication was generated, ST stock has appreciated by 25.85%%, and I have to believe that the previous all-time high at $59.04 will, at the very least, be tested.
The bullish indications that have been generated on the Sensata stock chart suggest that this investment is postured for further gains. Until there are indications to suggest otherwise, I can only assume that the trend toward higher prices is still in development, and therefore, ST stock will continue to appreciate.