SSYS Stock: Forging a Bottom
I have been watching and waiting for the pieces to fall into place for Stratasys, Ltd. (NASDAQ:SSYS) stock, and other 3D printing stocks, because I have reason to believe that an elusive bottom is being formed. If that is indeed the case, then there is a tremendous opportunity at hand in SSYS stock.
This sector is not for the faint of heart, and it is known for creating dreams that turned into nightmares.
The dream began in October 2011, when Stratasys stock bottomed at $17.88. This dream was fueled by speculation surrounding the possible applications and revolutionary possibility that 3D printing could bring to our daily lives. This enthusiasm drove SSYS shares to a high of $138.10 in just under 27 months. This represented an astronomical return of 672.37%, a return that many can only dream of.
At the peak at $138.10 in January 2014 is where the nightmare began. 25 months later, in February 2016, Stratasys shares hit a low of $14.88, completely erasing all the previous bull market gains, and then some. From peak to trough, SSYS shares lost 89.22% of their value, a performance return that creates reoccurring nightmares.
The 3D printing stocks are a prime example of a speculative stock bubble forming and then bursting, but there is a silver lining here. Once a bubble bursts, the speculative stock usually loses 90% of its value before a bottom is finally formed, and a sustainable rally can ensue. Stratasys has fulfilled this 90% loss criteria, and I have been searching for indications that a bottom is in place.
I develop my investment views using technical analysis. This method of investment analysis is based on the notion that historical price and volume data can be used to discern trends and forecast future prices. Due to the nature of this method, my analysis begins and ends using the prospective company’s price chart.
The following SSYS stock chart illustrates the technical indicator that has been instrumental in confirming the predominant trend in Stratasys shares.
Chart courtesy of StockCharts.com
The focus of this chart is the moving averages convergence/divergence (MACD) indicator in the lower panel. MACD is a simple, yet effective, trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
In April 2013, a bullish MACD cross was generated that indicated that bullish momentum was propelling Stratasys stock, and that the path of least resistance was geared towards higher prices. This indicator effectively confirmed that a bull market was in development, and higher prices were likely.
In April 2014, a bearish MACD cross was generated, and this indicated that bears had taken control of SSYS stock, and the path of least resistance was now geared towards lower prices. This indicator warned of the impending doom that would follow. Using this indicator to exit any prospective positions would have eliminated much of the losses that resulted shortly afterwards.
In July 2016, a bullish MACD cross was generated, and this served to indicate that the bulls were once again in control and bullish momentum was once again propelling the share price.
Aside from the 90% loss that Stratasys shares suffered, the bullish MACD cross was the second indicator to suggest a bottom was being forged.
The following stock chart illustrates the indicators that will confirm that a bottom has been forged in Stratasys stock.
Chart courtesy of StockCharts.com
Shortly after a bottom was formed in February 2016, a rally ensued. SSYS shares doubled in a few weeks, but that is where the rally stalled. There was a brief attempt to create a new high in April of the same year, but that attempt was quickly thwarted and a bearish trend soon ensued.
This bearish trend is easily defined using a simple trend line. This downtrend line is created by connecting the peaks on the price chart. There have been numerous attempts to overcome this level, but none have been successful. When, and if, SSYS stock breaks above this level, it will indicate that the bearish trend has concluded, and that a new bullish trend has commenced.
This breakout above the downtrend line will also coincide with a golden cross. A golden cross is a bullish signal that is produced when the 50-day moving average, highlighted in blue, crosses above the 200-day moving average, highlighted in red. Traders use this signal to confirm a bull market is in development.
Since the downtrend began, there have been numerous attempts to generate a golden cross, but all the attempts so far have been thwarted. In order to generate a golden cross, SSYS shares will need to appreciate, and this means breaking above resistance outlined by the downtrend line. A successful breakout will generate a golden cross, and this event will confirm that a bottom has finally been forged in Stratasys stock. A confirmed bottom suggests that higher prices are likely to follow.
Bottom Line on Stratasys Stock
I have been watching for an elusive bottom to develop in 3D printing stocks like Stratasys stock. There have been numerous developments to suggest that a bottom is being forged, but I am still waiting for confirming indicators before I can truly become bullish on SSYS stock.