WIX Stock: The Stock Chart Says It All
These are indeed exciting times as not a day goes by without a triple-digit move in the Dow Jones Industrial Average. I used the Dow as an example because it is a good measure to illustrate that volatility is currently elevated, and volatile markets are a ripe environment for traders. Investors, on the other hand, might not be so enthused with such wild swings, especially since high levels of volatility are associated with market weakness.
I have learned to embrace market corrections for a number of reasons, and at this moment, I continue to believe that once the volatility subsides, higher index values will follow. With this notion in mind, I continue to look for investments that are poised for higher prices, and this is exactly why I am focusing on Wix.Com Ltd (NASDAQ:WIX) stock.
Following the correction that gripped the markets, stock quickly found its footing and staged an advance. This advance was the catalyst that was responsible for creating a number of bullish technical developments that are currently suggesting that a move to much higher stock prices are now in development.
One of these technical developments was the completion of a technical price pattern, which is highlighted on the following Wix.com stock chart.
Chart courtesy of StockCharts.com
The pattern highlighted on the chart is a descending channel.
A descending channel is a bearish pattern that contains a sequence consisting of price action that is characterized by a series of lower lows and lower highs, which is the quintessential characteristic that defines a bearish trend.
Connecting this sequence of lows and highs produces two parallel downward-sloping trend lines that define the pattern and important levels of price support and price resistance.
Channel price patterns imply that stock prices will oscillate in between the trend lines until either support or resistance is broken, and then the stock price will proceed to accelerate in that direction. Wix.com stock is the perfect example of this notion, because on February 14, 2018, WIX stock broke above resistance and much higher stock prices prevailed.
I have reason to believe that this break above resistance is the beginning of a much larger move toward higher prices because the descending channel is an instrumental part of a much larger bullish trend.
This bullish trend is highlighted on the following chart.
Chart courtesy of StockCharts.com
This Wix stock chart has been annotated in order to highlight the constructive price action and the moving average convergence/divergence (MACD) indicator. These technical indicators have been responsible for creating and sustaining the bullish trend that has been in development since March 2016.
Constructive Price Action
Constructive price action describes an alternating wave structure consisting of impulse waves and consolidation waves, which are responsible for creating and sustaining a trend.
The waves highlighted in green are the impulse waves and they define the period in a bullish trend where the stock stages a sustained move toward higher prices. Impulse waves are advancing in nature and, as a result, these are the waves that investors would prefer to capture.
The waves highlighted in purple are the consolidation waves, and they define the period in a bullish trend where the stock price corrects and refrains from advancing. Consolidation waves are corrective in nature and, therefore, investors would prefer to avoid these waves when possible, but that does not mean that these waves are not important.
On the contrary, consolidation waves are very important waves because they restore health to a bullish trend, creating the necessary conditions so a new advancing impulse wave can follow.
This WIX stock chart illustrates that within the context of the wave structure, the descending channel is a consolidation wave and its completion is suggesting that an impulse wave is now in development and, therefore, much higher stock prices are on the horizon.
This notion of higher prices is being supported by the MACD indicator, which is a very influential technical indicator.
MACD is an 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. A bullish momentum signal implies that the stock is geared toward higher prices, while a bearish momentum signal implies that the stock is geared toward lower prices. This is very influential information because a stock cannot sustain a move in either direction unless the applicable momentum is supporting it.
As a result, it is not a coincidence that the wave structure coincides with the indications generated by the MACD indicator. For example, in April 2016, a bullish MACD cross was generated and an impulse wave followed. In May 2017, a bearish MACD cross was generated and a consolidation wave followed.
In January 2018, a bullish MACD was generated, and as long as the signal lines remain in bullish alignment, this signal is suggesting that an impulse wave is in development, which translates into higher Wix.com stock prices.
So now that I have laid out the reasons why I believe higher Wix.com stock prices are in development, a question remains with regards to a viable price objective for this move. Luckily, the wave structure can be used to create such an objective.
The theory behind constructive price action states that impulse waves separated by a consolidation wave are likely to mirror each other because the consolidation wave acts like a midpoint. If we apply this theory to the wave structure on the WIX stock chart, it suggests that $115.00 is a viable price objective for the impulse wave that is currently in development.
I believe that higher Wix.com stock prices are now in development because a number of technical indications that were generated on the WIX stock chart support this notion. As a result, I am bullish on this investment and will remain so as long the technical indications continue to support this notion.