SYMC Stock: Patience is Warranted
Symantec Corporation (NASDAQ:SYMC) stock has been on my radar for some time, and I have focused on this name on numerous occasions. This position first caught my eye in July and, at that time, I expected SYMC stock to run higher and test a previous level of resistance. My analysis played out as I expected.
My bias was bullish, but that view has now been set back, as I am now neutral on Symantec stock. The reason for my change in view is explained below.
I use technical analysis as my foundation to analyze stocks. This style uses past price and volume data to forecast future movements in stock prices. This style assumes that prices move in trends, that not all investors are rational, and that emotion has a tendency to drive investment decisions. This is why trends tend to overshoot rational fundamental levels.
The reasons I liked SYMC stock were based on the price chart, and the reason my bias has been set back to neutral is because there has been a trend reversal that is signalling that the trend higher has stalled.
Chart courtesy of StockCharts.com
The SYMC stock chart above is an impeccable piece of artwork. The picture that was painted on the chart above is known as rounded bottom, and the name effectively describes the shape. What really caught my eye was the size of this pattern; it took over a decade for this pattern to form. Larger patterns over a long duration are more significant and tend to outperform smaller patterns over a shorter duration.
Resistance (highlighted in baby blue) is currently sitting at the all-time highs set in 2004. If this level is ever breached, the potential upside is tremendous. I expected this level to be tested, but I always said that I did not expect this pattern to break out on the first attempt, so I am not in the least surprised that SYMC stock failed to break through this level on the first attempt.
With the price being rejected at the previous all-time high, the next logical level to be tested is support (highlighted in pink). This level sits between $20.00 and $21.50, and if SYMC stock tests this level prior to attempting a breakout of the all-time high, a bullish cup-and-handle pattern would be painted on the chart. This pattern would only serve to reaffirm the larger bullish picture, but such a pattern is only speculation at this point.
The following Symantec stock chart acted as the catalyst to change my view from bullish to neutral.
Chart courtesy of StockCharts.com
The SYMC stock chart was looking very healthy and bullish, as the chart above contains an impulse wave that was followed by a consolidation wave. Markets trend in this format and it is why trends look like stair-step patterns. The consolidation pattern was complete and a new impulse wave higher was set to develop. Symantec stock gapped higher out of the consolidation wave, but that move higher quickly failed (highlighted in red), as the price did not follow through.
I have always said that technical analysis is not perfect, and that signals fail all the time, but these failed signals are not to be ignored. They are powerful trend-reversal indicators and act as key reversal indicators. The failed signal above is the reason I now stand with a neutral bias on Symantec stock.
The trend reversal indicator increases the odds that the level of support illustrated on the first chart above is going to be tested in the near future, as the short-term trend is now to the downside.
The Bottom Line on Symantec stock
My bias is now neutral on Symantec stock, and I would wait for a new bullish signal before changing that bias. The big picture is still bullish, but I expect some price weakness and a possible test of the level of support between $20.00-$21.50. If SYMC stock breaks above resistance on a weekly basis, I will have no choice but to re-assume my bullish bias.