SINA Stock: Ready to Soar
The NASDAQ index is on a relentless tear, forging new highs on what seems like a daily basis. The technology stocks have done much of the heavy lifting, and there is now growing evidence that Chinese technology stocks are beginning to join in on the party. One of these Chinese technology companies is SINA Corp (NASDAQ:SINA) stock. I am quite excited about the prospects of this investment. My excitement for this name stems from the SINA stock chart. The price chart paints a compelling picture and is the only indication I need to carry a bullish view on this investment.
The reason why I only need a price chart to generate an investment view is because I use technical analysis to do so. Technical analysis is a method of investment analysis that uses historical price and volume data points to generate technical indications that are then used to create an investment view. These data points are used to discern a stock’s trend and forecast future stock prices.
The price chart above illustrates an impeccable bullish trend that began in August 2015. This trend contains the essential characteristic that defines most bull markets: higher highs and higher lows.
The following SINA stock chart illustrates indications, which I have highlighted, that support the view of a higher stock price.
Chart courtesy of StockCharts.com
This bullish trend is easily captured using a simple uptrend line. This simple uptrend line is created by connecting the lows on the price chart. This uptrend line creates an even plane that has served as a springboard every time the stock price and the trend line have met.
Using this uptrend line as a tool is almost as easy as it was to create. This is because this uptrend line is now the dividing line that separates bullish price action from bearish price action. As a result, as long as SINA stock is trading above this trend line, I can only assume that bullish tailwinds are in force, and therefore the trend towards higher stock prices is set to continue.
Speaking of bullish tailwinds, the moving average convergence/divergence (MACD) indicator located in the lower panel is a momentum indicator that distinguishes bullish momentum from bearish momentum. Signal-line crossings are used to distinguish between the two.
A bullish cross was just recently generated and it serves to suggest that bullish momentum is now governing SINA shares. When this indicator is engaged, bullish tailwinds are created, and as a result, it creates an environment where the path of least resistance is geared towards higher stock prices.
The following SINA stock chart illustrates further indications that support the view of a higher stock price.
Chart courtesy of StockCharts.com
There are numerous indications on the price chart above that reinforce the view that bullish tailwinds are creating an environment where the path of least resistance is geared towards a higher stock price.
For instance, aside from the uptrend line acting as a level of price support, the 200-day simple moving average (SMA) has also done its share of heavy lifting. The 200-day moving average is a very popular indicator that is used to define the long-term trend of an investment. It acts as a level of price support, and it is also known to act as the dividing line between a healthy stock trading in a bull market versus an unhealthy stock trading in a bear market.
Using this moving average is quite simple, so let me explain. A stock trading above the 200-day moving average is deemed healthy and in a bull market, while one trading below it carries similar but bearish implications. SINA shares have bounced off this moving average on multiple occasions, implying that the stock carries inherent bullish strength.
The technical price pattern that was just competed, via a breakout, is actually something to get really excited about. This inverse head and shoulders price pattern consists of three troughs, and a neckline. The middle trough is always the largest and it serves as the head. The adjacent troughs serve as the shoulders. The neck line is formed by connecting the reaction highs. The pattern is completed when price breaks above the neckline and serves to suggest that higher prices are expected to follow.
The completed head and shoulders pattern can also be used to project a potential price objective. This is done by taking the depth of the head and extrapolating it above the neckline. This method creates an initial price objective of $98.00.
Bottom Line on SINA Stock
There are numerous indications on the SINA stock chart that support a price advance. The bullish view was generated using technical indicators, so as long as the indications on the price chart support this view, I will continue to hold a bullish view on this investment.