WPRT Stock: A Bull Market in Development
I have been stumbling upon a number of alternative energy plays as I have been scouring charts, looking for compelling investments. This is how I came upon Westport Fuel Systems Inc (NASDAQ:WPRT). This Canada-based small-cap company produces and engineers alternative fuel systems and components.
What sounds like a potentially compelling investment has not been for fruitful for investors though. Once upon a time, in March 2012, WPRT stock traded as high $50.19, which is miles from the current price of Westport stock, which sits at $2.46. I am not here to rub salt in any wounds, so I will avoid quantifying this drop in percentage terms.
I am focusing on WPRT stock because there have been a number of developments on the Westport stock chart which are suggesting that a bullish trend reversal is in the making. The fact that a number of alternative energy stocks are also doing the same only serves to reinforce the bullish implication suggested by these indicators.
When I refer to indicators and developments on the company’s stock chart, I am speaking within the context of technical analysis. This is the method of analysis that I employ to generate a view on an investment, and it is based on the notion that historical data points can be used to project what the future may bring.
In essence, technical analysis utilizes the company’s stock chart as a looking glass. The idea of this may sound like a farce, but I have been using this method of investment analysis for nearly two decades, and I have had great success in doing so.
The following Westport stock chart illustrates an indication which is suggesting that a trend reversal is in the making.
Chart courtesy of StockCharts.com
The focus of this WPRT stock chart is an indication that is generated when the 50-day moving average (highlighted in blue) crosses the 200-day moving average (highlighted in red).
When the 50-day moving average crosses above the 200-day moving average, it creates a golden cross pattern. A golden cross is an indication which implies that a bull market is in development, and that, therefore, higher stock prices are expected to follow.
When the 50-day moving average crosses below the 200-day moving average, it creates a death cross. A death cross is an indication which implies that a bear market is in development, and that, therefore, lower stock prices are expected to follow.
Deciphering these indications is quite easy, because they are complete polar opposites.
In October 2013, a death cross was generated on the WPRT stock chart, implying that a bear market was in development. This indicator effectively suggested that the predominant trend was toward lower prices and that a long position in Westport stock would be ill-advised. While this indication was in bearish alignment, the Westport stock price fell from a high of $27.75 to a low of $0.82. Avoiding a long position in WPRT stock while this indicator was engaged would have saved an investor from steep losses.
The moving averages that created the death cross have been in bearish alignment for four years and, along the way, there were three attempts at producing a golden cross—which would have undone the bearish implications suggested by the death cross. Unfortunately, each and every time the 50-day moving average was within striking distance of the 200-day moving average, a sell-off ensued and a golden cross was averted.
The number of times a golden cross was averted is why, when one was actually generated in June of this year, this indication carries such significance. It has been four years since the moving averages have been in bullish alignment. There have been numerous attempts at a golden cross, and none have been successful until now. I do not take this indication lightly, and it is why I have the inclination to believe that a bull market in Westport stock is now in development.
I have reason to believe that a bull market in Westport stock is now in development. This bullish view is predicated on a single indicator, which has finally swung into bullish alignment. Using a single indicator is usually ill-advised, but, given the significance of this indicator, I will have to make an exception this time. As long as this indicator remains in bullish alignment, I will have bullish expectations for WPRT stock.