This Is Why Workday Stock Is Poised for Further Gains

workday stock analysis
iStock.com/NicoElNino

WDAY Stock: An Epic Move Is Still in Development

Today’s focus is Workday Inc (NASDAQ:WDAY) stock, and I am returning to provide a bullish update.

The last time I covered Workday Inc was on July 10, in a report titled “Workday Stock Is All Set for That Epic Move Toward Higher Prices.” In that report, I outlined a number of technical indications that have me believing that WDAY stock is all set to make an epic move toward higher prices.

Well, the epic move toward higher stock prices that I have been expecting has yet to show its face. But the good news is that Workday stock continues to make gradual steps toward higher prices, meaning that the outcome is still a very real possibility.

On August 15, WDAY stock completed a technical price pattern that augurs further gains. This completed technical price pattern is highlighted on the following chart.

Advertisement

Chart courtesy of StockCharts.com

The technical price pattern captured on the above Workday stock chart is a descending channel.

A descending channel is characterized by price action that contains a series of lower lows and lower highs. Connecting the peaks and troughs created by the price action resulted in the creation of two parallel downward-sloping trend lines.

These two trend lines are very important because they not only capture the price pattern, but also identify where levels of price resistance and price support reside.

This is important information because, in order to complete the pattern, WDAY stock needed to either break above price resistance or break below price support.

On June 27, the stock tried to break below price support, but this move toward lower prices was quashed by the 200-day moving average.

The 200-day moving average acts as a dividing line that separates stocks in a bullish state from stocks in a bearish state. As long as Workday stock is trading above the moving average, it continues to suggest that a bull market is in development.

The 200-day moving average has a habit of acting like a level of price support, just like it did in this circumstance.

If a stock fails to break below price support, it is likely to turn and challenge price resistance. This is exactly what occurred on July 12. Then, on August 15, WDAY finally broke above resistance, completing the descending channel.

This completed price pattern suggests that further gains are now on the horizon.

This reinforces the bullish view already being suggested by the well-defined bullish trend on the following WDAY stock chart.

Chart courtesy of StockCharts.com

The above chart captures a bullish trend that has been in development since February 2016,

This bullish trend has been characterized by price action that contains a series of higher highs and higher lows. This creates the stair-step price action that bullish trends are so famous for.

The uptrend line annotated on the above WDAY stock chart was created by connecting the series of higher lows. This uptrend line captures the bullish trend by pinpointing where prices support resides.

This is pertinent information because, as long as Workday stock continues to trade above the uptrend line, I can only assume that the bullish trend that began in February 2016 is still in development.

This uptrend line has already been tested four times. Each time, the stock price has found its footing right on this metric and higher prices have followed. The bounces off this uptrend line have been supported by the moving average convergence/divergence (MACD) indicator.

MACD is an influential momentum indicator that distinguishes whether bullish or bearish momentum is influencing the trading 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.

Without the applicable level of momentum, a stock cannot sustain a directional move. That is why each and every time the uptrend has successfully been tested, a bullish MACD signal was generated and higher stock prices have prevailed.

The uptrend line was tested in June. The end result was not any different than the previous tests, wherein a bullish MACD signal was generated soon after. These indications are currently suggesting that higher stock prices are once again likely to prevail.

All the indications I have pointed out support the notion that Workday stock is now likely to stage an advance. But the reason I have been anticipating an epic move toward higher prices is captured on the following stock chart.

Chart courtesy of StockCharts.com

The above chart illustrates that a significant level of price resistance resided at $116.50. It marked a long-standing high.

This level was first established in February 2014. For the next four years, it thwarted all attempts to move beyond it.

In January 2018, this level of price resistance finally met its demise when Workday stock was able to sustain a close above it. This was a very bullish event because, when a stock breaks above a long-standing high, it rarely stops there.

Breaking above a longstanding all-time high is a very bullish event, and it has been known to spawn very powerful rallies. Look no further than Shopify Inc (NYSE:SHOP) and Facebook, Inc. (NASDAQ:FB) for perfect examples.

Once those stocks broke above their long-standing highs, there was nothing to contain them from advancing, which is why these stocks experienced such powerful moves toward higher stock prices.

This shared characteristic is why I continue to believe that WDAY stock is destined to make an epic move toward higher prices. This move should be similar in nature to the moves that Facebook stock and Shopify stock experienced once their long-standing highs were overcome.

Analyst Take

I believe that Workday stock is destined for much higher prices. My bullish views are being reinforced by a number of mounting technical indications that continue to suggest that the stock is geared for higher stock prices.

My bullish view was generated using technical analysis. Therefore, I will maintain a bullish view until there are technical signals suggesting that a bullish view is no longer warranted.