Technical Analysis: This Is Why VRTX Stock Is Poised for Higher Prices

Vertex Stock
credits:istock.com/monsitj

VRTX Stock: Indications Are Supporting an Advance

All of a sudden, anxiety has swept the markets. Higher interests rates, spurred by inflation fears, have resulted in a sell-off. The Dow closed down 666 points on Friday, February 2, reinforcing the sinister nature of the sell-off that just occurred. Many are wondering if this is the beginning of things to come—perhaps it could be—but this moment, I am going to assume that this sell-off is just a knee-jerk reaction from the higher interest rates. Therefore it is just a much needed and overdue correction.

With this mind, I am still biased toward the notion that the equity markets are geared toward higher prices. As a result, I will continue to look for investments that are geared for such an outcome. This is why I am focusing on Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) stock, because I have the inclination to believe that higher Vertex stock prices are on the horizon. This bullish view was generated by analyzing the stock chart.

The following stock chart illustrates a simple metric suggesting that a bullish view on VRTX stock is warranted.

Vertex Stock Price Chart

Chart courtesy of StockCharts.com

The price action on the stock chart resembles an obscure staircase that was created by a sequence of higher highs and higher lows, which I always describe as the quintessential characteristic that defines all bullish trends.

This bullish trend has been in development since 2005, which means it is almost 12 years in the making. The recent ascent to a new all-time high implies that there is little to suggest that this bullish trend is going to end soon.

The uptrend line (highlighted in blue), which has been annotated on the Vertex stock chart, was created by connecting the sequence of higher lows. This uptrend line acts as a significant level of price support and every time it has been tested, the share price has bounced right off of it.

Using the uptrend line is quite easy, and aside from it suggesting where support can be found, I can use it to assume that as long as VRTX stock is trading above it, the bullish trend that began in 2005 is intact and, therefore, higher stock prices are likely to prevail over time. Only when this stock falls below this trend line can I make the assumption that the bull market has come to an end.

The notion of a bull market and higher stock prices is being reinforced by the constructive price action highlighted on the following Vertex stock chart.

Vertex Stock Chart

Chart courtesy of StockCharts.com

This stock chart illustrates the most recent advance, which began right after the uptrend line was tested. This advance toward higher prices has been constructive in nature.

Constructive price action describes an alternating wave structure consisting of impulse waves and consolidation waves.

The waves highlighted in green are impulse waves and they are advancing in nature. They capture the period in a bullish trend where the stock price stages a sustained move toward higher prices.

The waves highlighted in purple are consolidation waves and they are corrective in nature. They capture the stage in a bullish trend where the stock price corrects and unwinds any overbought conditions that were created during the impulse wave that preceded it. Consolidation waves are very important because they restore the health to a trend that sets the stage for a new advancing impulse wave to develop.

The Vertex stock chart clearly shows that the development of these waves has been supported by the moving average convergence/divergence (MACD) indicator.

MACD is a momentum indicator that determines whether bullish or bearish momentum is influencing the price action in a stock. Momentum is necessary for a stock to stage a sustained move, and bullish momentum creates a path of least resistance geared toward higher prices, while a bearish momentum cross creates a path of least resistance geared toward lower prices.

The MACD signals highlighted on the stock chart are a great example of this notion because impulse waves have coincided with a bullish MACD cross, while consolidation waves have coincided with a bearish MACD cross.

This stock is currently within an impulse wave, which is being supported by a bullish MACD cross, supporting the notion that higher VRTX stock prices are currently in development.

Analyst Take

I am bullish on Vertex stock because a number of indications on the VRTX stock chart are implying that such a view is warranted. Because this bullish view is generated using indications on the company’s stock chart, I will continue to maintain it as long as the indications that generated it remain in bullish alignment.