SPPI Stock: Don’t Fight the Tape
“Don’t fight the tape” is a famous saying in the investment and trading world. What it means is that you should not trade against the predominant direction in which the major markets are heading.
In a bull market, positions should be weighted toward long exposure. In a bear market, positions should be weighted toward short exposure.
The current market environment is still in a bullish state. This is supported by the fact that a number of sectors and indices have gone on to push higher, forging new all-time highs in the process.
This suggests that the tape is still bullish and, therefore, that long exposure remains the most prudent choice—at least, until the tape suggests otherwise.
Today, I am focusing on Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) because it is on the verge of completing a technical price pattern that will potentially open the door to much higher SPPI stock prices.
Said pattern is highlighted on the following Spectrum Pharmaceuticals stock chart:
Chart courtesy of StockCharts.com
The pattern highlighted on this SPPI stock chart is an “ascending triangle.” These develop when the price action is characterized by a sequence containing a series of higher lows and a static high.
I captured this pattern by connecting the price action that characterized it. The end result was two converging trend lines. These pinpoint where price resistance and price support reside.
Identifying where support and resistance lie is important information because this pattern will only be resolved once Spectrum Pharmaceuticals stock breaks either above resistance or below support.
Once one of these events occurs, I expect a powerful move to follow. The reason why I expect it is because triangle price patterns have the ability to store energy within themselves, much like a coiled spring. This stored energy is only released once the pattern is resolved.
I have the inclination to believe that SPPI stock will break above resistance, which currently resides at $23.25, and that much higher prices will prevail.
My bullish beliefs are based on the indications highlighted on the following chart:
Chart courtesy of StockCharts.com
This chart highlights a wave structure and influential momentum indicator, which have been sustaining a move toward higher SPPI stock prices.
The wave structure consists of impulse waves (green) and consolidation waves (purple).
The former are advancing in nature, hence they capture the stage in a bullish trend when a stock sustains a move toward higher prices.
The latter, meanwhile, are corrective in nature. They capture when a stock corrects and digests the gains from the preceding impulse wave.
These waves work together, creating the “stair step” price action that bullish trends are so famous for.
The ascending triangle, currently in development, doubles as a consolidation wave. And when it is complete, it will determine whether the impulse wave that follows is toward higher or lower Spectrum Pharmaceuticals stock prices.
As I mentioned earlier, I have the inclination to believe that this pattern will play out by breaking above resistance, with higher stock prices following because the moving average convergence/divergence (MACD) indicator is currently supporting such an outcome.
The MACD indicator is very influential, distinguishing between bullish and bearish momentum using the crossing of a signal line. Bullish momentum implies that a stock is geared toward higher prices, while bearish momentum implies the opposite.
In order to sustain a move in either direction, the applicable momentum is required. That is why the wave structure has an impeccable track record of coinciding with the MACD indicator.
Every impulse wave on the Spectrum Pharmaceuticals stock chart coincided with a bullish MACD signal. What’s more, every consolidation wave coincided with a bearish MACD signal.
In June 2018, a bullish MACD cross was generated, implying that higher SPPI stock prices are likely. This is why I believe an advancing impulse wave is on the horizon.
An influential momentum indicator is currently suggesting that Spectrum Pharmaceuticals, Inc. is geared toward higher prices. This is influential information because a break above resistance, which resides at $23.35, would complete a technical price pattern, reinforcing the notion that the chance of higher SPPI stock prices is high.