WTI Stock: A Significant Bottom Has Been Forged
The market environment has been a tenuous one at best, but I have good news to share. The elevated level of volatility that was responsible for creating the wild swings in the market has finally subsided, and the market environment that was so conducive to lower prices is coming to an end. Therefore, the markets are now are likely to appreciate.
When the markets come out of an elevated level of volatility like they have now, the leadership coming out of this environment is usually different than the leadership going in. In recent weeks, while the markets were correcting, I noted that the energy sector was inherently strong as many names in this sector were setting up to make a move toward higher prices. Now the markets have regained their footing, it shouldn’t be too surprising that this sector is staging an impressive advance.
It should also come as no surprise that I am focusing on W&T Offshore, Inc. (NYSE:WTI) stock, which is an energy play. But more importantly, I have the inclination to believe that WTI stock is likely to appreciate from its current levels.
My inclination toward higher W&T Offshore stock prices stems from the price action on the WTI stock chart, which is suggesting that a long-term bottom has already been forged.
This price action is highlighted on the following W&T Offshore stock chart.
Chart courtesy of StockCharts.com
This WTI chart illustrates a completed technical price pattern known as a double bottom.
A double bottom price patterns consist of two consecutive lows that are separated by a peak in between. When the stock price closes above the peak, it completes the pattern, suggesting that a trend reversal has just occurred. This marks the point in time where the trend toward lower prices has concluded and a new bullish trend has begun.
The peak the separating the consecutive bottoms on the W&T Offshore stock chart was responsible for creating a significant level of price resistance, which resided at $3.45.
This double bottom price pattern is unlike any other pattern because once the peak was established, it took two-and-a-half years and many attempts to finally break above it. This was a very large bottoming pattern, and the size of the pattern is directly related to the repercussions it suggests once it is completed.
On January 3, 2018, WTI stock finally broke above price resistance and completed the pattern, suggesting that a significant bottom was in place and that higher W&T offshore prices were likely to prevail.
The price action that followed was just as impressive because, after resistance was broken, WTI stock sustained an advance, but then it returned to test the significant level of price resistance from above. Testing a previous level of resistance is called a backtest and it serves to reinforce that the break above resistance was legitimate, while simultaneously establishing this level as a new level of price support.
Successful backtests act like a springboard, and once they are completed, stocks have a tendency to accelerate in the direction of their newly established trends.
WTI stock has just made a higher high after successfully completing a backtest, suggesting that WTI stock is now in an accelerated mode. As a result of this, higher W&T Offshore stock prices are expected to follow.
I am bullish on W&T Offshore stock because the price action is suggesting that a long-term bottom has been put into place. As a result of this bottom, higher WTI stock prices can now be expected to follow.