SBLK Stock Inches Away from Generating a Powerful Breakout

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SBLK Stock: A Powerful Pattern Is in Development

Once upon a time, the stock market was able to shrug off all damning news, but not anymore. As a result, the first quarter was not a good one.

The markets have been plagued with elevated levels of volatility, and the wild swings have been symptoms of this plague.

What makes matters worse is that we have just entered that wonderful month of May, when the phrase “sell in May and go away” gets tossed around like it’s an incredible investment strategy.

Given the tenuous market environment this year, such a notion may not be ill advised, but the markets are still situated above important levels of price support.

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These levels of price support are very significant and, until they are broken, I have to keep an open mind that higher stock prices are still a possibility. This is why I continue to carry a bullish view.

My bullish state is why I continue to look for investments that are poised to make a move toward higher stock prices.

I am currently watching Star Bulk Carriers Corp. (NASDAQ:SBLK) because an intriguing technical price pattern is currently in development on the SBLK stock chart. This pattern will determine which direction the stock price is heading in next.

This technical price pattern is highlighted on the following Star Bulk Carriers stock chart.

Chart courtesy of StockCharts.com

The technical price pattern highlighted on the SBLK stock chart is an ascending triangle.

An ascending triangle is created when the price action is characterized by a series of higher lows and a static high. Identifying and capturing this pattern is achieved by connecting the price action using two converging trend lines.

The upper trend line represents a significant level of price resistance, while the lower trend line represents a significant level of price support. The progression of this pattern causes the range between price support and price resistance to contract.

This contraction of space causes energy to build within this pattern as traders position themselves on either side of support and resistance in anticipation of a possible resolution.

The longer the pattern is in development, the more participants it attracts. This is a major reason why triangles are particularly powerful patterns.

In order to unleash the energy stored within this pattern, Star Bulk Carriers stock must exit the pattern. This will be achieved by either breaking above resistance, which currently resides at $13.00, or by breaking below price support, which is currently at $10.75.

A break above resistance will suggest that a powerful move toward higher stock prices will follow, while a break below support will suggest that a powerful move toward lower stock prices will follow.

I believe that the former is the most likely scenario to play out, because a key indicator continues to suggest that a bull market is in development.

This indicator is highlighted on the following Star Bulk Carriers stock chart.

Chart courtesy of StockCharts.com

This SBLK stock chart illustrates that, since January 2016, the stock has been making an orderly advance toward higher prices. This advance has consisted of a series of higher highs and higher lows, which is the quintessential characteristic of a bullish trend.

Soon after this bullish trend began, a golden cross was generated in August 2016, when the faster 50-day moving average, highlighted in blue, crossed above the slower 200-day moving average, highlighted in red.

This is a very popular signal and, when it is generated, it implies that a bull market is in development.

This indicator was right on the mark, because it displayed the point when the trend toward higher Star Bulk Carriers stock prices began to accelerate. Twelve months later, SBLK stock peaked at $13.40.

This peak initiated the creation of the ascending triangle. The entire time this triangle was in development, the moving averages responsible for generating the golden cross remained in bullish alignment.

There was an attempt at negating the implications suggested by this indicator in December 2017, but the Star Bulk Carriers stock price quickly appreciated, negating a death cross.

The inability to generate a bearish signal is a testament to the inherent strength contained within this investment, supporting my beliefs that the ascending triangle is likely to resolve itself in a bullish manner and that higher stock prices will prevail.

Analyst Take

I am watching the development of a technical price pattern on the Star Bulk Carriers stock chart because I believe that the resolution of this pattern will determine when the next sustained move in SBLK stock will begin.

At this moment, I believe that this pattern will play out in a bullish manner, supporting the notion that the next sustained move will be toward higher stock prices. That’s because an influential technical indicator remains in bullish alignment, supporting such an outcome.