Xcerra Stock Has Broken Free and a Huge Move Is Possible

xcerra stock analysis

XCRA Stock: Broken Free from Its Shackles

First it was rising interest rates that were causing the markets to swoon, and now it’s the notion of a trade war. Tensions are running high and, as a result, 2018 is characterized by high volatility.

In this report, I am focusing on Xcerra Corp (NASDAQ:XCRA) stock because recent events have unleashed Xcerra stock from its shackles and it is now primed to make a move toward higher XCRA stock prices.

The event that has set this stock free was a terminated merger agreement citing difficulty in securing federal approval. A terminated merger agreement sounds like bad news, but instead, this news unleashed a fury of buying pressure, where XCRA stock appreciated by 14.36% over a four-day period.

This surge in price has created a number of technical developments, and the potential for an epic move toward higher prices is now a real possibility.

The following XCRA stock chart illustrates a couple of signals that were generated before the stock price surged.

Chart courtesy of StockCharts.com

This price chart highlights a level of price resistance at $10.00 that was first established in April 2017, when the merger agreement was first announced. For the next 10 months, the Xcerra stock price traded below this level of resistance, and rightfully so, because the value of the merger agreement was already disclosed.

Once news broke that the deal was terminated, XCRA broke above this level of price resistance, and higher prices have since prevailed. This move toward higher prices was responsible for generating a bullish MACD cross.

MACD is an acronym for moving average convergence/divergence, and this indicator is used to determine whether bullish or bearish momentum is influencing the trading action in a stock. This indicator is very significant because, in a bullish trend, a stock cannot sustain a move toward higher prices unless bullish momentum is supporting it.

As a testament to this notion, the MACD indicator was in bearish alignment the entire time the merger agreement was pending. Only when the news broke that the agreement was terminated did the MACD generate a bullish cross.

As long as the MACD indicator remains in bullish alignment, it will continue to suggest that further gains are on the horizon, which is pertinent information because Xcerra stock is on the verge of breaking out of a wave structure that will imply that much higher XCRA stock prices are on the horizon.

This wave structure is highlighted on the following Xcerra stock chart.

Chart courtesy of StockCharts.com

This 10-year XCRA stock chart captures a wave structure that is responsible for creating and sustaining a bullish trend. This wave structure is constructive in nature and consists of impulse waves and consolidation waves, which work together in an alternating fashion.

The wave highlighted in green is an impulse wave. It is advancing in nature and it captures the stage in a bullish trend when the stock price makes a sustained move toward higher prices.

The wave highlighted in purple is a consolidation wave. It is corrective in nature and it captures the stage in a bullish trend when the stock price corrects and refrains from advancing. These waves are very important because they create the necessary conditions so a new advancing impulse wave can follow.

The consolidation wave highlighted on the XCRA stock chart has been in development for eight years. This is a very large period for a consolidation wave, and once this wave is resolved, a powerful impulse wave should follow. The good news I have to share is that this wave is on the verge of completion, and the RSI indicator is in a position where a powerful move toward higher prices can develop.

The relative strength indicator (RSI) is an oscillator used to measure whether a stock is overbought or oversold. A reading above 70 is overbought, while a reading below 30 is oversold.

The RSI has just created an overbought reading, and contrary to popular belief, an overbought stock doesn’t mean the stock is likely to correct. As long as RSI remains above 70, this indication becomes embedded, and an embedded RSI suggests that the stock will remain overbought, which translates to higher XCRA stock prices.

Let me clarify, it does not just translate to higher Xcerra stock prices, but an accelerated move toward higher Xcerra stock prices. Only when the RSI falls back below 70 would it imply that a correction is taking hold. A great example of this occurred in 2008, when the RSI was embedded below 30 and the XCR stock price accelerated toward lower prices.

Xcerra stock is now in a position where a sustained close above $11.50 would imply that an accelerated move toward higher prices is in development.

Analyst Take

Following the terminated merger agreement, a powerful dynamic has just presented itself on the Xcerra stock chart, where a sustain close above $11.50 would suggest that an epic move toward higher XCRA stock prices is in development.