NUAN Stock: In Bullish Alignment
On May 10, Nuance Communications Inc. (NASDAQ:NUAN) stock surged higher following an earnings announcement that was filled with a slew of good news. Aside from beating earnings expectations, Nuance stock raised guidance for fiscal 2017. And if that news was not good enough, it also announced a strategic partnership with Lexmark International Inc (NYSE:LXK). This slew of good news caused NUAN stock to pop by 7.76% on the day.
What if I told you that there were indications that implied that such a move was in the making. Would I have your undivided attention?
I am focusing on Nuance Communications stock because there were numerous indications implying that a higher stock price was likely, and I am dead serious when I say this. These indications that implied a higher stock price were all generated using the NUAN stock chart.
For those not familiar, using a stock chart to generate an investment view is known as technical analysis. I have spent the better part of two decades studying this method of investment analysis, because the information that it provides is extremely valuable and timely.
The following Nuance Communications stock chart illustrates a couple of indications that were implying that a higher stock price was likely.
Chart courtesy of StockCharts.com
On April 24, 2017, NUAN shares closed above $17.50. This price point acted as a level of resistance for a little under a year’s time. Every time Nuance stock attempted to breach this price point, sellers were eager to step in and provide an ample amount of supply to thwart any further progress. This level of resistance was first established in June 2016, and it was tested on five separate occasions before the bulls were finally able to wear down the bears and breach this level of resistance.
This marvelous feat of breaking above resistance is highlighted as a breakout on the chart above. This bullish indicator was generated on April 24, and it implied that a higher stock price was likely to follow. It is worth noting that, once a level of resistance is broken, it becomes a level of price support. If I were looking for an optimal entry point, I would use this level as a trigger to act, if it were to be tested in the near future.
If I take this break above resistance one step further, I can use the constructive price action that occurred below resistance to create a potential price objective. This price objective is obtained by taking the depth of the range below resistance, and extrapolating that value above it. Let me reiterate: not only did the breakout that occurred on April 24 suggest that higher prices were likely, it provided a potential price objective of $20.50.
The breach of resistance was not the first indication that a bullish move to the upside was brewing. A golden cross was generated in January 2016. This indicator uses moving-average crosses to generate a bullish or bearish signal. When the faster 50-day moving average crossed above the slower 200-day moving average, it generated a bullish signal, indicating that the stock price was trending to the upside. This indicator is popular among the investment community because it serves to suggest that a bull market is in development.
Wait, there is more. The following Nuance Communications stock chart illustrates a long-term indication that has been supporting this advance.
Chart courtesy of StockCharts.com
The focus of the Nuance price chart above is the moving average convergence/divergence indicator, better known as the MACD indicator. This trend-following momentum indicator uses signal-line crossings to distinguish between bullish and bearish momentum. I have found that charts using longer-term scaling provide indications that are instrumental in confirming the direction of the predominant trend.
For instance, a bullish cross was generated in April 2015. This indicator was suggesting that bullish momentum was swirling around Nuance stock. As a result, it should not be a surprise that the share price appreciated in the months ahead. A bullish cross creates an environment where the path of least resistance is geared towards a higher stock price.
Similar things can be said for a bearish cross, which was generated in June 2016. Although it missed the top by a considerable margin, it did correctly suggest that a lower NUAN stock price was likely in the months ahead.
This brings us to the current bullish cross that was generated in February 2017, and is still currently engaged. This bullish cross was generated a few months prior to the breakout, and it created the necessary bullish tailwinds for Nuance stock to finally break above resistance.
Bottom Line on Nuance Stock
Nuance Communications stock surged higher following a slew of positive news. This surge higher was already being suggested by indications on the NUAN stock chart. These indications are still in bullish alignment, so this supports the view that a higher Nuance stock price is still likely.