VIAV Stock on the Verge of Breaking Out Toward Higher Prices

VIAV stock
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VIAV Stock: Setting up to Make a Move

I take my cues regarding the health of a stock by looking at the price action that develops on its stock chart.

The reason why I am bringing this up is because if we look at the price action for the major market indices, they are sending a very clear and concise message.

That message is that the markets are primed for further gains, meaning there is nothing to suggest that the markets are concerned with the trade war currently being waged.

If the markets are not concerned, then I have no reason to be concerned.

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Therefore, I will carry on doing what I do best, which is looking for investments that are setting up to make a move.

I am currently focusing on Viavi Solutions Inc (NASDAQ:VIAV) stock, because it is on the verge of completing a technical price pattern that will imply that higher VIAV stock prices are likely to follow.

This technical price pattern is highlighted on the following Viavi Solutions stock chart.

Chart courtesy of StockCharts.com

The technical price pattern highlighted on the VIAV stock chart is a cup-and-handle price pattern.

Cup-and-handle patterns are created when a significant level of price resistance acts as a barrier and prevents the stock price from advancing beyond it. The significant level of price resistance responsible for creating this pattern was established in May 2017.

The stock’s inability to move beyond it resulted in the creation of two distinct troughs.

These two troughs, where the first is larger than the second, are what characterize the cup-and-handle pattern because they create a picture that looks remarkably like a teacup.

Viavi Solutions stock is currently testing the significant level of price resistance.

Breaking above it would complete the pattern, suggesting that higher VIAV stock prices are likely to follow.

Such an event would be significant on many fronts because this cup-and-handle price pattern doubles as a consolidation wave. Its implications are highlighted on the following Viavi Solutions stock chart.

Chart courtesy of StockCharts.com

This VIAV stock chart highlights a wave structure consisting of impulse waves and consolidation waves, which are responsible for creating the stair-step price action that bullish trends are so famous for.

The waves highlighted in green are impulse waves. These waves are advancing in nature. Therefore, impulse waves capture the stage in a bullish trend where a stock sustains a progressive move toward higher prices.

The waves highlighted in purple are consolidation waves. These waves are corrective in nature. Therefore, consolidation waves capture the stage in a bullish trend where a stock corrects and refrains from advancing.

As I mentioned earlier, the cup-and-handle price pattern doubles as a consolidation wave. Breaking above resistance will imply that higher VIAV stock prices, via an impulse wave, are likely to follow.

Developing impulse waves have a tendency to mirror the impulse wave that preceded the consolidation wave, suggesting that much higher prices are likely to follow once this wave is initiated.

The implication of such an event would be very significant because it would also break above a long-standing downtrend line, which is highlighted on the following Viavi Solutions stock chart.

Chart courtesy of StockCharts.com

This VIAV stock chart highlights a progressive move toward lower prices that has been characterized by a series of lower highs. This series of lower highs is the quintessential characteristic that defines a bearish trend.

The downtrend line highlighted on the Viavi Solutions stock chart was created by connecting the series of lower highs, and it effectively captures the progressive move toward lower prices.

The downtrend line provides very pertinent information because it pinpoints where price resistance resides.

This is very important information because, in order to negate the progressive move toward lower prices, VIAV stock needs to break above the downtrend line. Otherwise, I can only assume that lower prices are likely to prevail.

This downtrend line currently shares the same level of resistance at the cup-and-handle price pattern.

This means that when the cup-and-handle price pattern is completed, it will not only suggest that higher prices via an impulse wave are in development, but it will also negate the implications implied by the downtrend line, suggesting that a new trend toward higher Viavi Solutions stock prices has begun.

Analyst Take

VIavi Solutions stock is on the verge of completing a technical price pattern that will imply that higher VIAV stock prices are likely to follow.

What makes this stock special is that this technical price pattern shares its level of price resistance with other key metrics, suggesting that when the stock price finally does break above it, the likelihood of higher prices is almost a certainty.