RARE Stock Has Broken Out, Higher Prices Are Likely to Follow

rare stock price
iStock.com/holwichaikawee

RARE Stock Is Now Geared Toward Higher Prices

If we ignore the media headlines and focus on the price action on the indices, there is good news all around.

The Russell 2000 small-cap index is forging new all-time highs and the Nasdaq Composite index is doing the same. New highs are bullish and there are clear signs that the stock market is still in a bull market. I expect further gains to follow.

I couldn’t be happier that the indices are making new highs, because, when the markets were correcting in the first quarter of this year, I stood fast and maintained a bullish bias. Now that the markets are pushing higher, my stance is being vindicated.

I am focusing on Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) stock once again because my stance on thisstock is also being vindicated.

Advertisement

On May 25, my report titled “RARE Stock Is on the Verge of Breaking Out Toward Higher Prices” was published. In the weeks that followed this report, Ultragenyx stock has broken out, and the repercussions of this event suggest that higher stock prices are likely to follow.

This breakout was initiated after the stock price broke above a significant level of price resistance. This level of price resistance is highlighted on the following  RARE stock chart.

Chart courtesy of StockCharts.com

The significant level of price resistance highlighted on this chart is a downtrend line.

This downtrend line captures a bearish trend that began in July 2015. It has been characterized by a progressive move toward lower prices, consisting of a series of lower highs and lower lows.

These lower highs have created a number of peaks on the Ultragenyx stock chart, and this downtrend was created by connecting these peaks.

The downtrend line is significant because it not only captures the bearish trend, but it also defines where price resistance resides. This is pertinent and important information because as long as RARE stock was trading below the downtrend line, I could only assume that the bearish trend was still in development and that lower prices were likely to prevail.

In order to negate the implications suggested by this downtrend line, the stock price needed to break above the downtrend line, which is exactly what happened on April 25.

This breakout is suggesting that the bearish trend has run its course, opening up the door for a bullish trend to develop.

The repercussions of this breakout are magnified by the fact that the break above the downtrend line coincided with a break above the 200-week moving average.

The 200-week moving average, like the 200-day moving average, acts as a dividing line that separates bullish stocks from bearish ones. Breaking above this moving average implies that RARE stock has gone from a bearish stance to a bullish one. This complements and reinforces the breakout above the downtrend line.

These signals have also coincided with an influential momentum indicator, further reinforcing the notion that Ultragenyx stock is now likely to sustain a move toward higher prices.

This momentum indicator is highlighted on the following RARE stock chart.

Chart courtesy of StockCharts.com

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

MACD uses the crossing of a signal line to determine if bullish or bearish momentum is influencing 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.

This is very pertinent information because a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it.

A testament to this notion is clearly visible on the Ultragenyx stock chart, because the entire time the bearish trend was in development, the MACD indicator had been in bearish alignment.

In May, a bullish MACD cross was generated. This signal negated the bearish implications of the MACD signals that preceded it, and it is now implying that the path of least resistance for Ultragenyx stock is toward higher stock prices.

This bullish MACD signal has coincided with the break above the downtrend line and the 200-week moving average. These coinciding signals are strongly suggesting that RARE stock is now primed for higher prices.

Analyst Take

Ultragenyx stock has broken out above two significant levels of price resistance, while simultaneously generating a bullish MACD signal. These coinciding signals strongly suggest that RARE stock is now geared toward higher prices.