SPWR Stock: A Bullish Trend Is Born
I am focusing on SunPower Corporation (NASDAQ:SPWR) stock because the alternative energy space—specifically the solar power stocks—is staging an advance. This advance is sector-wide and it carries a number of bullish implications for SunPower stock. A sector-wide move is like a rising tide that raises all boats, reaffirming and fueling any bullish indications that are presently being painted on the SPWR stock chart.
As I write this report, SunPower shares are currently surging by 6.62%, which is coming off the heels of a number of indications on the company’s stock chart that are suggesting that a bottom has formed, implying that the bearish trend that punished the share price has concluded. These indications go as far as suggesting that higher stock prices are now on the horizon. The size and scope of this move alone illustrates the power that a bullish price chart can exhibit when it encounters a sector-wide move that creates the so-called “rising tide.”
This SPWR stock illustrates the technical price pattern known as a “double bottom reversal pattern.” This pattern is identified by the trading action that contains two coinciding lows separated by a peak in between. This pattern is completed when the stock price closes above the level of resistance that is defined using the peak.
The following SunPower stock chart illustrates the technical price pattern that is confirming that a new bullish trend has just begun.
Chart courtesy of StockCharts.com
On June 23, 2017, the 50-day moving average crossed above the 200-day moving average, creating a golden cross. A golden cross is a bullish indication suggesting that a bull market is in development. This assumption is made because this signal captures the transition as short-term momentum begins to accelerate compared to its long-term average.
On July 11, 2017, SunPower stock managed a sustained close above $9.35, which confirmed that the double bottom price pattern was complete, indicating that the bearish trend towards lower prices had finally concluded. This also serves to suggest that a new bullish trend is in development, a bullish trend that was already being suggested by the golden cross.
Double bottom reversal patterns, aside from suggesting the obvious, are also instrumental in generating a potential price objective. This objective is produced by taking the depth of the pattern and extrapolating that value above the horizontal level of resistance that was created using the peak. This creates a potential price objective of $12.50 for SPWR stock. This price objective acts as the first stop for this new bull market that is now in development.
The following SunPower stock chart illustrates the other long-term indications that are currently creating a bullish backdrop that is supporting the notion that a new bull market is now in development.
Chart courtesy of StockCharts.com
The focus of this SPWR stock chart is the indicator located in the lower panel, labeled “MACD.” MACD stands for moving average convergence/divergence and this indicator is used to distinguish between bullish and bearish momentum using the crossing of a signal line.
In order to stage an advance, bullish momentum is needed, and the MACD indicator not only indicates whether bullish or bearish momentum is driving the trading action, but it is extremely effective in suggesting whether an advance or a decline is set to take hold.
In July 2012, a bullish MACD cross was generated, indicating that bullish momentum was influencing the trading action in SunPower stock and that the stock price was therefore geared towards higher prices. This indication effectively suggested that an advance was set to take hold and the 834.89% run that followed is a testament to the value of this indicator.
The same indicator generated a bearish cross in October 2014, indicating that bearish momentum was influencing the trading action in SPWR stock and that the stock price was therefore geared towards lower prices. This indication effectively suggested that the previous advance had concluded, implying that lower prices were set to take hold. The 80.53% loss suffered after this indication was generated reaffirms the notion that this indicator cannot be ignored.
In June of this year, a new bullish cross was generated, suggesting that bullish momentum is once again influencing this investment. This therefore suggests that higher stock prices are now on the horizon. This indication creates a bullish backdrop that is supporting the bullish view suggested by both the golden cross and the double bottom reversal pattern.
Bottom Line on SunPower Stock
I am very bullish on the stock because there are a number of indications on the SPWR stock chart that are suggesting that a new bull market is in development. Therefore, this is the only view that is warranted.