WDAY Stock: 2017 Is Set to Be a Banner Year
Workday Inc (NYSE: WDAY) announced earnings on June 1, 2017, and the initial response was negative as exceptions were high going into this quarter. This caused the share price to sell off by a little more than two percent. This weakness didn’t last long, and the following day, WDAY stock reversed this loss and surged by 2.87%. The reversal was not a complete surprise because the Workday stock chart was already suggesting that this investment was set to appreciate. As a result, savvy investors used the temporary weakness of the stock price to snap up a position on the cheap.
The Workday share price has been on a torrid pace in 2017, and is registering a year-to-date gain of 55.73%. This exceptional level of price performance was substantiated in May 2017, when a technical price pattern generated a bullish signal, indicating that this current pace towards higher prices is set to continue.
The WDAY price chart illustrates the technical pattern known as a “cup and handle” pattern. Technical analysis is not rocket science, and therefore, the name of the pattern describes the shape being painted on the price chart.
The following Workday stock chart illustrates the price pattern that suggested that higher stock prices are likely to continue.
Chart courtesy of StockCharts.com
The characteristic that helps identify this pattern is a significant level of price resistance. This level of price resistance serves to contain the price. The first time this level was reached, a substantial sell-off ensued, which established this price point as a significant level of price resistance.
The second time the stock price attempted to break above this level, sellers were quick to offload their positions because they distinctly remembered the reaction that occurred when the level was tested the first time around. This resulted in a sell-off. This time around, however, the reaction was muted and a lot smaller.
When the stock returned this level for the third time, the cup and handle pattern was created. This pattern was completed when the stock price finally crossed above the significant level of price resistance that halted any further gains on the previous two attempts.
The price pattern that has presented itself on the price chart above was completed in May 2017, and is highlighted as a breakout. This breakout serves to suggest that Workday stock is now set to appreciate. The price pattern can also be used to obtain a potential price objective.
This price objective is generated by taking the depth of the cup and extrapolating it above the significant level of price resistance that generated the cup and handle price pattern. Applying this method to the pattern above produces a price objective of $120.00. This price objective carries bullish implications beyond the price point that is being suggested. These bullish implications are best illustrated using the following Workday stock chart.
Chart courtesy of StockCharts.com
The $120.00 price objective is suggesting that Workday stock is setting up to create an all-time high. Such a feat would open the door to much higher stock prices because it would create the dynamic where all shareholders who are long on WDAY stock are holding positions in the black, while anyone who decided to place a trade betting against this company is holding a position that is underwater.
These naysayers will have to cover their bearish positions, while bullish investors will be reluctant to sell because their positions continue to outperform. This creates an environment where there is a lack of supply, coupled with increased demand from investors wanting to join the party and bearish investors who need to cover their short positions. Such a dynamic can push the share price to unprecedented levels, squeezing the bears into a really uncomfortable position. I have seen incredible runs occur after a longstanding high, such as this one, has been finally breached.
This bullish view is being reinforced by the moving average convergence/divergence (MACD) indicator. The MACD indicator is a trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
A bullish indication was generated in August 2016, and it is serving to suggest that the predominant trend is currently being fueled by bullish momentum. This creates an environment where the path of least resistance is geared towards higher prices. This indication remains in bullish alignment, supporting the notion that higher stock prices are likely to continue.
Bottom Line on Workday Stock
Workday stock has completed a technical price pattern that carries tremendous bullish implications because it serves to suggest that new all-time highs in the share price are in order. Such a feat will open to the door to much higher WDAY stock prices.