Technical Analysis: This Is Why TAHO Stock Is Likely to Appreciate

tahoe stock
iStock.com/AndreyPopov

Tahoe Stock Has Likely Put in a Bottom

Volatility in the stock market has subsided a tiny bit, but that has done little to alleviate the downward pressure that markets are currently experiencing, and the conditions remain turbulent.

I still have the inclination to believe that this downward pressure will subside and another advance will follow. I have continued to scour the markets for investments that are setting up to make a move toward higher prices.

My followers have probably noticed that the companies I focus on consistently change to stay in tune with the sectors that are currently outperforming. Resources stocks have started to turn higher as inflation begins to heat up and yields continue to rise.

As a result, I am now focusing on Tahoe Resources Inc (NYSE:TAHO).

Advertisement

I have reason to believe that TAHO stock has put in a bottom, which suggests that higher prices are likely to follow. My beliefs stem from a completed technical price pattern and a break above a very influential moving average.

These technical indications are highlighted on the following Tahoe Resources stock chart.

Chart courtesy of StockCharts.com

This Tahoe stock chart highlights a completed cup-and-handle price pattern and a break above the 200-day moving average.

The cup-and-handle price pattern created on the above TAHO stock chart was a result of a significant level of price resistance, which resided at $5.00 and prevented the stock price from advancing beyond it.

The inability to move beyond this level of price resistance resulted in the creation of two distinct troughs. The first trough is much larger than the second, and together they resemble a teacup shape, which is how this pattern received its name.

This cup-and-handle price pattern was completed on April 12, when Tahoe stock closed above the significant level of price resistance that defined this pattern. Now that resistance has been broken, higher prices are likely to prevail.

The break above resistance that completed the price pattern also coincided with a break above the 200-day moving average.

The 200-day moving average acts as a dividing line that separates stocks trading in a bull market from stocks trading in a bear market. When a stock price is above this moving average, it is bullish. When the stock price is below the moving average, it is bearish. It is that simple.

The last time the TAHO stock price made a sustained move above its 200-day moving average was in March 2016. By August of that same year, the price had appreciated by 76.3%, suggesting that a break above this moving average is pertinent.

The price action that followed the breakout has been very constructive, because Tahoe Resources stock has returned to test the significant level of price resistance and the 200-day moving average.

This type of price action is called a backtest, and it is a very common occurrence after a breakout. Backtests serve to reaffirm that the breakout was legitimate, while simultaneously establishing previous levels of price resistance as a new level of price support.

Backtests act like springboards and, as long as Tahoe stock can maintain its footing above these metrics, higher stock prices are likely to prevail.

The momentum indicator highlighted on the following Tahoe Resources stock chart is supporting the notion that a move toward higher prices is on the horizon.

Chart courtesy of StockCharts.com

The momentum indicator highlighted on this TAHO stock chart is the moving average convergence/divergence (MACD) indicator.

MACD uses the crossing of a signal line to distinguish whether bullish or bearish momentum is influencing the price action in a stock. This is a very influential indicator because a stock cannot sustain an advance or a decline unless the applicable momentum is supporting it.

The above Tahoe stock chart is a great example of this indicator in action, because every advance and decline has been supported by the appropriate MACD signal.

The MACD signal lines are currently converging, and a bullish cross is likely to be generated in the coming weeks. Such an event would suggest that Tahoe Resources stock is geared toward higher stock prices, reaffirming the notion that the stock has put in a bottom and that higher prices are likely to prevail.

Analyst Take

I believe that Tahoe Resources stock is likely to appreciate, because the signals that were generated on the company’s stock chart are suggesting that a rally will probably occur.

As a result, I will maintain a bullish view on TAHO stock as long as these signals suggest that such a view is warranted.