TXT Stock: Only Moments Away from a Powerful Move
The Textron Inc. (NYSE:TXT) stock chart is a sight to see. Its beauty and finesse are remarkable, and if I could pick one stock to outperform over the next few months, this would be it. My bullish view on TXT stock has nothing to do with the buyout rumors that are swirling around this name, or the escalated level of geopolitical risk in the world today. I am bullish on Textron stock because I am completely enamored with the price action and indications that have been painted on the TXT stock chart. Those other factors I have listed are definitely contributing to the bullish picture, but I since I cannot quantify these factors, I stick to what I know, which is analyzing the Textron stock chart.
This method of investment analysis that employs analyzing a company’s stock chart is known as technical analysis. Technical analysis is predicated on the notion that historical price and volume can be used to speculate on what the future may bring, and when it is applied appropriately, the results are simply outstanding. I have spent nearly two decades dedicating myself to this method of analysis, and it is the basis of all my investment views and strategies.
The following Textron stock chart illustrates the price action and a key indicator that is suggesting that the path of least resistance is geared towards higher stock prices. A substantial move to the upside is only moments away from occurring.
Chart courtesy of StockCharts.com
Let’s begin with the indication that suggests that TXT stock is geared towards higher prices, which is the 200-day moving average.
The 200-day moving average is created by averaging the stock’s closing price over the last 200 days and plotting that value on the stock chart. This creates a smoothed trend line that depicts the long-term trend in the stock. As a tool, the 200-day moving average is used to determine whether the investment is healthy and trending higher or unhealthy and trending lower.
Distinguishing between these polar opposites is actually quite an easy task. A stock that is trading above the 200-day moving average is healthy and carries bullish implications, while one trading below the 200-day moving average is unhealthy and carries bearish implications.
The stock chart clearly shows that Textron stock continues to trade above the 200-day moving average. This metric has been tested three times in the last 12 months, and every time, buyers have stepped in to support this moving average. The inability to trade below this metric is a testament to its inherent strength, which suggests that this investment is geared towards stock prices.
The constructive price action above the 200-day moving average is suggesting that a move towards substantially higher TXT stock prices is only moment away from occurring.
Constructive price action consists of an alternating two-wave structure. The first wave, an impulse wave, defines the period in a trend where the stock price stages a violent and linear advance. The second wave, a consolidation wave, defines the stage in a trend where overbought conditions from the preceding impulse wave are alleviated. Alleviating an overbought condition creates the necessary environment for a new impulse wave to develop. These waves essentially feed off each other, creating the right conditions so a trend can remain sustainable.
For much of this year, a consolidation wave was in development, and in July of this year, after Textron stock tested the 200-day moving average, the stock price exited the consolidation wave in an upward direction, completing it. The completed wave is suggesting that a new advancing impulse wave is now in development.
In order to confirm that a new impulse wave is in development, TXT stock needs to forge a new high. This has yet to be accomplished, but the price action remains constructive. Another consolidation wave is now in development, and the infamous 200-day moving average has been tested once again. This is referred to as an embedded wave pattern because smaller waves are encapsulated within larger ones.
The embedded wave pattern is suggesting that an explosive move is in the making because it acts like coiled spring getting ready to release its energy. The positioning of this price action above the 200-day moving average suggests that the move is most likely to occur to the upside.
Analyst Take: I am watching Textron stock because the price action and a key metric on the TXT stock chart are suggesting that an explosive move to the upside is only moments away from occurring. This bullish view was generated using technical analysis, and therefore, I will remain bullish on this investment until the indications suggest that another view is warranted.