WDAY Stock: One Last Hurdle to Clear
The current market environment reminds me of when I first started investing, around 1998. At that time, speculation was running rampant, and a popular topic of conversation among my peers was technology and dotcom stocks. Those were the times, and the frothy markets that characterized that era are back once again. Therefore, I am expecting similar parabolic moves.
I am focusing on Workday Inc (NYSE:WDAY) stock because I believe that Workday stock is on the verge of a parabolic move toward higher stock prices. I came to this bullish view by analyzing the WDAY stock chart.
For anyone who has not frequented my works, let me briefly explain that analyzing an investment using its price chart is a method called technical analysis. I have spent the last two decades studying and applying this method of analysis for one simple reason: when this method is applied appropriately, the results are simply outstanding.
The following stock chart illustrates that WDAY stock is approaching a very influential and significant level of price resistance.
Chart courtesy of StockCharts.com
The significant level of price resistance that is highlighted on the stock chart resides at $116.50, and it marks the all-time high in WDAY stock.
This level was first established in February 2014, and the stock price has been trading below this level ever since—four years, to be exact. In recent months, the Workday stock price has been testing this level of price resistance, and a break above it will forge a new all-time high. Such an event would be significant because bullish implications are likely to follow.
Breaking above a longstanding all-time high is bullish on many fronts, and such an event is known to spawn powerful rallies. Once resistance is broken, the stock price will be free to appreciate because there won’t be any overhead resistance to contain the stock price from advancing.
This dynamic is magnified by the fact that everyone who is long on WDAY stock is sitting pretty with a profit, and everyone who is short on the stock is underwater, holding a loss.
As the stock price appreciates, it will attract momentum investors at a time when bearish investors are inclined to cover their short positions. This creates an environment where demand overwhelms supply, and incredible rallies have resulted under similar conditions.
Such a scenario can, and will, only play out when resistance is finally broken. I have the inclination to believe that such a feat is on the horizon.
My belief is centered around the indications that are highlighted on the following stock chart.
Chart courtesy of StockCharts.com
This stock chart supports the notion that resistance at $116.50 will be broken.
Since February 2016, Workday stock has been in a bullish trend that has been characterized by a series of higher highs and higher lows, which is the quintessential characteristic of all bullish trends.
This bullish trend has been captured using a simple uptrend line that was created by connecting the series of higher lows. Not only does this uptrend line define the bullish trend, it acts as level of price support. I believe that, as long as the WDAY stock price is trading above the uptrend line, the bullish trend in intact and, therefore, higher prices will prevail.
The uptrend line has been tested on three separate occasions and, each and every time, the share price has bounced off this trend line. These bounces have been supported by the moving average convergence/divergence (MACD) indicator.
MACD is an indicator that distinguishes whether bullish or bearish momentum is influencing the trading action in a stock. A bullish MACD cross implies that momentum is influencing a stock toward higher prices, while a bearish MACD cross implies that momentum is influencing a stock toward lower prices.
Each and every time the uptrend has been tested, a bullish MACD cross followed, and higher stock prices have prevailed. The MACD signal lines are currently converging, and a bullish cross is likely to be generated in the days ahead. Such a bullish indication would occur just below resistance at $116.50, and it would increase the odds that the stock price breaks above it on its next attempt.
I have reason to believe that, once the Workday stock price breaks above resistance at $116.50, much higher stock prices will follow. The indications on the WDAY stock chart are about to generate bullish signals, implying that such a feat is likely to occur in the not-too-distant future.