There’s No Resistance to Contain the TDOC Stock Price From Advancing
The notion of higher interest rates has created a turbulent stock market that is characterized by wild swings. These wild swings are the market’s way of trying to come to grips with the higher rates.
It has been a slow process, but volatility has finally begun to subside. If the markets are going to advance again, now is likely the time it will happen.
Even though this market has been quite difficult to navigate, there have been pockets of strength and a number of companies poised for further gains.
I am focusing on Teladoc Inc (NYSE:TDOC) for a number of reasons. Teladoc stock just reported earnings that beat on both the top and bottom lines, which sent the stock surging.
More importantly, the price action on the TDOC stock chart has been constructive. A completed technical price pattern is suggesting that this move toward higher prices has much further to run.
The constructive price action I am referring to is illustrated on the following Teladoc stock chart.
Chart courtesy of StockCharts.com
This chart highlights the wave structure that has been responsible for creating and sustaining a bullish trend in Teladoc stock that began in March 2016.
This wave structure consists of impulse waves and consolidation waves, and it creates constructive price action.
The impulse waves, which are highlighted in green on the above TDOC stock chart, define the period in a bullish trend when a stock makes a sustained advance toward higher prices.
The consolidation waves, which are highlighted in purple, define the period in a bullish trend when a stock corrects and refrains from advancing.
These waves feed off each other, creating the quintessential characteristic that defines all bullish trends, which is a sequence of higher highs and higher lows.
The waves that have created the bullish trend in TDOC stock have coincided meticulously with the signals generated by the moving average convergence/divergence (MACD) indicator.
MACD is a simple yet influential momentum indicator that uses the crossing of a signal line to distinguish whether bullish or bearish momentum is driving the price action in a stock.
Bullish momentum implies that a stock is geared toward higher prices, while bearish momentum implies that a stock is geared toward lower prices.
As a result, it is not a mere coincidence that impulse waves have coincided with a bullish MACD cross, while consolidation waves have coincided with a bearish MACD cross.
In February, a bullish MACD cross was generated and, as expected, an impulse wave quickly followed. This impulse wave is expected to stay in development as long as the MACD indicator remains in bullish alignment.
This recent run toward higher TDOC stock prices has completed a technical price pattern, which is implying that further gains are on the horizon.
This technical price pattern is highlighted on the following Teladoc stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on this stock chart is a cup and handle price pattern.
Cup and handle price patterns contain two distinct troughs, whereas the first trough is much larger than the second. These troughs are created because a significant level of resistance prevents the stock price from advancing beyond it.
This significant level of price resistance resided at $38.00. In February, TDOC stock broke above this resistance level, completing the pattern.
A completed cup and handle price pattern implies that higher prices are likely to follow, because there is no level of price resistance to contain the stock price from advancing.
The size and scope of this pattern is directly related to a move toward stock prices that is now expected. This cup and handle price pattern has been in development for almost three years, making it a fairly large pattern, implying that a fairly large move is expected to follow.
The great thing about this pattern is that it can also be used to quantify the move that is now expected to follow by generating a potential price objective for TDOC stock.
This price objective is obtained by taking the depth of the cup and extrapolating that value above the significant level of resistance that was responsible for creating it, producing a potential price objective of $65.00.
I believe that much higher Teladoc stock prices are on the horizon.
This bullish view is based on a completed technical price pattern and a number of technical indications supporting the notion that TDOC stock is likely to appreciate.