ZAYO Stock: Indications Favor a Bullish Breakout
The focus of this publication is Zayo Group Holdings Inc (NYSE:ZAYO) stock. This communications infrastructure company has an impeccable stock chart, which should not be a surprise if you have read any of my publications in the past. The ZAYO stock chart is orderly and pristine, which are the qualities I look for in an investment when I am looking to create an investment strategy.
If this is your first time coming across one of my publications, let me quickly explain the method I use to generate a view on a potential investment. This method of analysis is called technical analysis, and it involves the study and behavior of price. I use this method for one reason in particular; when it is applied correctly, the results are simply outstanding.
Zayo stock has been trading in a defined trading range for almost a year now and the resolution to this range will dictate whether this investment is set to appreciate or depreciate.
The following ZAYO stock chart illustrates the trading range this stock has been confined in.
Chart courtesy of StockCharts.com
This Zayo stock chart illustrates a trading range that is defined by a horizontal trend line at $29.50, which represents price support, and a horizontal trend line at $35.50, which represents price resistance.
This investment has been oscillating between this range for almost a year now. Support has been tested twice and resistance is currently being tested for the third time. One day, the stock price will either break above resistance at $35.50 or break below support at $29.50, and this will determine whether this investment is set to appreciate or depreciate.
The indicator in the lower panel labeled “MACD” is supporting a break above resistance.
MACD is an acronym for moving average convergence/divergence, and this indicator is used to determine whether bullish or bearish momentum is influencing the stock price.
The bullish MACD cross highlighted on the stock chart is suggesting that bullish momentum is influencing the trading action in ZAYO stock, which creates the path of least resistance geared towards higher stock prices. This indicator increases the odds that the trading range will resolve itself in a bullish manner, suggesting that higher prices are on the horizon.
A bullish break out of the trading range would reinforce the long-term bullish trend, which has already seen ZAYO stock appreciate from a low of $19.00 to where it currently stands at $35.38.
The following Zayo stock chart illustrates the constructive price action that defines this long-term bullish trend.
Chart courtesy of StockCharts.com
This price chart illustrates that the price action has been constructive in nature.
Constructive price action consists of impulse waves and consolidation waves, which work in an alternating fashion to create and sustain a trend.
The impulse waves, highlighted in green, serve to define the period in a sustained bullish trend where the stock price stages a swift and linear advance. The majority of the gains made in a bullish trend occur within this wave.
The consolidation waves, highlighted in purple, serve to define the period in a sustained bullish trend where the stock price moves against the predominant trend in a choppy trading action. This price action serves to unwind any overbought conditions that were created during the preceding impulse wave in order to create the necessary conditions so a new impulse wave can develop.
This bullish trend began in October 2014 and these waves have created the necessary environment where this trend can flourish. Since inception, the stock has appreciated by 86.21%.
A breakout above the resistance level outlined by the consolidation wave currently in development would suggest that the consolidation wave is complete, and therefore, a new impulse wave is set to develop.
This feat would create a new all-time high. New all-time highs are known to create epic runs towards higher prices because there is no overhead resistance to contain the price from advancing.
ZAYO stock has been trading within a trading range for nearly one year and a resolution to this price action will determine which direction the stock price is heading in next. A key momentum indicator, as well as the price action that preceded it, favors a bullish resolution to the trading range. This suggests that the next move is towards higher stock prices.