VMware Stock Is Setting Up for Further Gains

VMW StockVMW Stock: Bullish on Multiple Time Frames

I like VMware, Inc. (NYSE:VMW) stock as an investment on many levels. All of these levels have to do with a different time frame using the company’s price chart. I have found that the best way to analyze a potential investment is to take a look at it from different time frames. When all these time frames conclude to one premise, then I know that my view on a potential investment is sound.

Applying this method of multiple time frames on VMware stock suggests that the trend is bullish. This bullish backdrop is reinforcing a price pattern that is in development. This pattern could act as a trigger for the next directional move in VMW stock.

For those not familiar with my style of investment analysis, I use technical analysis to generate a view on a potential investments. This method of investment analysis is based on the notion that historical price and volume data can used to discern trends and forecast future prices. As a result, my views are heavily reliant on my abilities to analyze a company’s price chart.

For nearly two decades, I have been refining my skills in this method of analysis, and I have found great success in applying it to potential investment strategies.

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The following long-term monthly VMW stock chart illustrates an indicator that supports a bullish view, and a level of resistance that provides a potential price objective.

VMW stock chart

Chart courtesy of StockCharts.com

The indicator on the monthly price chart above that supports a bullish view is the moving average convergence/divergence (MACD) indicator located in the lower panel. MACD is a simple and effective trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.

In August 2016, a bullish cross was generated, indicating that bullish momentum was once again propelling the share price. This serves to suggest that the path of least resistance is toward higher prices. The MACD indicator has not disappointed, as the price of VMW shares pushes higher while this indicator continues to support an advance.

The trend line on the chart labeled “Resistance” is where I believe VMware shares are heading. This trend line has served to contain the price of VMW since its inception, and I believe this bullish rally in VMW shares will at least attain this level. Every bullish MACD cross served to propel shares until the rally finally attained this level, and I do not see any reason why this time will be different. The resistance level currently sits just south of $110, and I am patiently waiting for the price to meet that level.

The following daily VMware stock chart illustrates the indicator and trend line that have supported this bullish advance.

VMWare stock chart

Chart courtesy of StockCharts.com

The advance off of the February 2016 lows has been been identified by the quintessential characteristic of a bullish trend, which begins in the lower left of the price chart and ends in the upper right of the price chart. This bullish advance has been extremely orderly and, as a result, it is easily defined by using a simple uptrend line.

This uptrend line is created by simply connecting the troughs on the price chart, and using the chart is as simple as it was to create. As long as VMware stock is above this uptrend line, a bullish view is warranted and I can only assume that higher prices will prevail. Falling below this trend line would suggest that the bullish advance had concluded, and bearish implications will follow.

The indicator that supported this advance is a golden cross, and it was generated in June 2016. A golden cross is a bullish signal that is produced when the faster 50-day moving average crosses above the slower 200-day moving average. This signal illustrates that momentum over the medium term is outpacing the long-term average.

Traders use this signal to indicate that a bull market is in development, and it is not uncommon for a price to accelerate in the direction suggested by this indicator.

VMware stock is currently testing the uptrend line, and this level currently coincides with the 50-day moving average. These two coinciding levels suggest that support is strong at this level because two distinct metrics are supporting it.

The following hourly VMW stock chart illustrates the technical price pattern that will act as a trigger for the next directional move.

VMW stock chart

Chart courtesy of StockCharts.com

The hourly VMW stock chart above illustrates that a symmetrical triangle is developing just above support outlined by the previous chart that was provided.

Symmetrical triangles are consolidation patterns that are created with two converging trend lines. The upper trend line represents price resistance, and the lower trend line represents price support. As this pattern develops, the range between support and resistance begins to contract. This contraction causes momentum to build within the price pattern. The momentum is finally released when the price breaks above resistance or below support. I particularly love these patterns because they are known for their explosive breakouts.

If I were to speculate on which direction the price will break out of this technical price pattern, I would lean toward a bullish resolution, because the indicators on the price chart continue to support an advance.

Bottom Line on VMware

I am bullish on VMware stock because the indicators and price patterns on multiple time frames support this view. There is a price pattern that is currently developing on an important level of price support. A bullish breakout would suggest that higher prices are likely. My views on VMW stock were generated using the price chart and, until there are indications that another view is warranted, I will remain bullish.