VRAY Stock: This Breakaway Gap Is Significant
The markets continue to appreciate, and it does not seem like any bad news has the ability to derail this market at its current juncture. The move toward higher index values has been supported by a wide group of stocks and sectors, suggesting that this move has merit and is likely to continue.
I am currently focusing on ViewRay, Inc. (NASDAQ:VRAY) stock because a number of technical developments are currently suggesting that ViewRay stock is destined for much higher prices.
These technical developments precipitated from a surge in price that is highlighted on the following ViewRay stock chart.
Chart courtesy of StockCharts.com
This VRAY stock chart highlighted the price action that occurred on July 25, 2018. On that fateful day, ViewRay stock gapped higher and closed the day higher by 25.65%.
The catalyst that sent the stock price surging higher was a news release filled with good news. They started off by stating that the company appointed a new CEO and new COO. This was followed by an announcement that revenue for the second quarter exceeded analyst expectations, which was topped off very nicely, as they reaffirmed year-end guidance.
This surge in price was a very significant event. For one, it left a price gap on the stock chart. This gap in price leaped right over a significant level of price resistance, which resided at $10.40. I labeled this gap a breakaway gap because price gaps that leap over significant levels of price resistance are breakaway gaps by definition.
Sticking with the definition of a breakaway gap, these price gaps rarely get filled and almost always signal that a new trend has begun. The surge in volume that accompanied this breakaway gap is reaffirming the significance of this event.
I happen to believe that this breakaway gap is the beginning of a much larger move toward higher VRAY stock price because this surge in price also completed a technical price pattern in the process.
The completed technical price pattern is highlighted on the following ViewRay stock chart.
Chart courtesy of StockCharts.com
This VRAY stock chart illustrates a technical price pattern known as a cup-and-handle pattern.
Cup-and-handle price patterns are created because a significant level of price resistance prevents the stock price from advancing beyond it.
This significant level of price resistance on the ViewRay stock chart resided at $10.40. The inability to move beyond it created two distinct troughs, with the first trough being much larger than the second. These troughs create a picture resembling a teacup, which characterizes a cup-and-handle price pattern.
The surge in price on July 25, 2018, caused VRAY stock to break above the significant level of price resistance, completing the cup-and-handle pattern. The spectacular move that followed left absolutely no doubt that the pattern was just completed, suggests that higher stock prices are on the horizon.
The great thing about this price pattern is that it also can be used to generate a price objective. The price objective is obtained by taking the depth of the cup and extrapolating that value above the significant level of price resistance that defined it. Putting this method to work suggests that $16.00 is a potential price objective.
The development of higher stock prices has been supported by the moving average convergence/divergence (MACD) indicator located in the lower panel.
MACD is a very influential momentum indicator that uses the crossing of a signal line to determine whether 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.
Momentum is a very influential force, to such a degree, a stock cannot sustain a move in either direction unless the applicable momentum is supporting it. This is why every time a MACD signal was generated, the stock price proceeded to move in the direction suggested by it.
Currently, a bullish MACD signal is in effect. It was generated in June 2018, and higher prices have since prevailed. As long as this indicator remains in bullish alignment, it will continue to support the notion that higher VRAY stock prices are in development.
I am bullish on ViewRay stock because it has just completed a technical price pattern suggesting that higher VRAY stock prices are on the horizon.