WPX Stock: Energy Stocks Are Currently Outperforming
I think it is safe to say that it is indeed a difficult market to navigate. The market leaders of 2017 have fallen by the wayside and the wild market swings have made this market tough to stomach.
Volatility has subsided somewhat but has done little to mitigate the downward market pressure. There are sectors that are currently bucking the bearish trend and thriving in this environment, and the energy sector is currently one of them. So it should not be too surprising that I have been focusing on a number of energy stocks.
The energy company I am focusing on today is WPX Energy Inc (NYSE:WPX), and the reason why I chose WPX Energy stock is because it has recently completed a technical price pattern that is suggesting that higher WPX stock prices are now in development.
This technical price pattern is highlighted on the following WPX Energy stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the WPX stock chart is called a cup-and-handle pattern.
Cup-and-handle price patterns are created when a significant level of price resistance prevents the stock price from advancing beyond it. This inability to sustain a move above resistance causes the market to react. These reactions create two distinct troughs, where the first trough is much larger than the second. These troughs create a picture that resembles a teacup, which is where the pattern gets its name.
The significant level of price resistance that was responsible for creating the cup-and-handle pattern on the WPX Energy stock chart resided at $16.50. This price point was first established in November 2016, which means that this pattern was in development for one-and-a-half years until it finally broke above resistance in April 2018, completing the cup-and-handle price pattern.
The completion of this price pattern implies that WPX stock is now likely to appreciate because there is no longer a level of price resistance to contain the stock price from advancing.
This notion of higher WPX Energy stock prices is being magnified by the price action that preceded the cup-and-handle price pattern.
The combination of the cup-and-handle price pattern and the price action that preceded it is highlighted on the following WPX Energy stock chart.
Chart courtesy of StockCharts.com
The WPX stock chart illustrates that when the cup-and-handle price pattern is combined with the price action that preceded it, a constructive wave structure is created.
Constructive wave structures are responsible for creating and sustaining a bullish trend, and they consist of two distinct waves: an impulse wave and a consolidation wave.
The wave highlighted in green is an impulse wave, and this wave defines the period in a bullish trend when a stock initiates a sustained move toward higher prices. These waves are advancing in nature. Therefore, all the gains in a bullish trend are captured within this wave.
The wave highlighted in purple is a consolidation wave, and this wave defines the period in a bullish trend when a stock corrects and refrains from advancing. Corrective price action is required in every bullish trend because it creates the necessary environment so the next advancing impulse wave can follow. These waves are corrective in nature. Therefore, all the losses are captured within this wave.
The cup-and-handle pattern doubles as a consolidation wave, and its completion implies that an impulse wave is now in development, where higher WPX Energy stock prices are likely to prevail.
This notion of higher WPX Energy stock prices is being supported by the moving average convergence/divergence (MACD) indicator.
MACD is an influential momentum indicator that uses the crossing of a signal line in order to determine whether bullish or bearish momentum is influencing the price 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. A stock cannot sustain a move in either direction unless the applicable momentum is supporting it.
The entire time the constructive wave structure has been in development, the MACD indicator has been in bullish alignment, supporting the notion that higher WPX stock prices are in development.
While the consolidation wave was in development, a bearish MACD cross was averted. Averting a bearish signal is a very strong indication suggesting that there is inherent strength contained within this investment. The inability to generate a bearish signal suggests that WPX stock price is now likely to accelerate its ascent.
The completed technical price pattern on the WPX Energy stock chart is implying that WPX stock is now likely to appreciate. As result of these developments, I will maintain a bullish view on this stock as long as it maintains its footing above the price point that completed the price pattern.