ZBRA Stock Is Technically Sound
I first stumbled upon Zebra Technologies Corp. (NASDAQ:ZBRA) stock in November 2016 after it reported a better-than-expected earnings quarter. That news sent the stock surging by 14.61%, and I quickly realized that this surge in price was in the context of bullish price action.
I went on to suggest in my previous publication about this company that higher Zebra stock prices were likely. I even had the audacity to suggest that $87.00 was a potential price objective for ZBRA Stock.
For anyone who hasn’t had a chance to sample my previous publications, it is worthwhile to note that my views on a potential investment are generated using technical analysis. This method of investment analysis is based on the notion that historical price and volume data can be used to discern a price trend and forecast future prices. This may sound like a silly notion, but I have had great success in applying this method of analysis to my trading strategies, and perhaps my many followers can also attest to the inherent value of this method.
The $87.00 target that was generated using rules set out by technical analysis was met on December 20, 2016, which was only 24 trading days after my report was published. This in itself should provide some reinforcement for technical analysis.
The reason for this current report is that there are indications on the Zebra stock chart that are currently supporting the notion that another price advance is setting up.
The technical indicators on the following ZBRA stock chart have supported the current advance up to this point.
Chart courtesy of StockCharts.com
The moving average convergence/divergence (MACD) indicator located in the lower panel of the chart above has been instrumental in identifying whether a bullish or bearish trend is in development. MACD is a simple, yet effective, trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
In August 2015, a bearish cross was generated, indicating that bearish momentum was propelling ZBRA shares and that, as a result, this investment was geared toward lower prices, because this was the path of least resistance. This indicator effectively confirmed that prices were set to decline.
This decline was easily defined by using a simple downtrend line. This downtrend line is created by connecting the peaks on the price chart. Once a downtrend line is established, using it as a tool is as easy as it was to create.
As long as the price remains below the trend line, it is safe to assume that lower prices are set to prevail, because the trend toward lower prices is firmly intact. Breaking above the downtrend line serves to suggest that the bearish trend has concluded, and it opens up the door for a bullish advance to commence.
In August 2016, ZBRA shares broke above the downtrend line, suggesting that the bearish trend had concluded. This is the point where ZBRA shares began to trend in an upward direction.
In November 2016, a bullish MACD cross was generated, indicating that bullish momentum was now propelling Zebra shares and that, as a result, the path of least resistance was geared toward higher prices. This indicator served to confirm that a bullish advance had begun.
This bullish advance is defined on the price chart above by using an uptrend line. Like its predecessor, the downtrend line, this trend line defines the bullish advance and, as long as the price of Zebra stock remains above this level of price support, I can only assume that higher prices are likely to follow.
The following price chart illustrates the bullish price action that has been developing above the uptrend line.
Chart courtesy of StockCharts.com
The price chart above is an excellent example of bullish constructive price action. Bullish constructive price action consists of a two-wave structure: an impulse wave, which is highlighted in green, and a consolidation wave, which is highlighted in purple.
The objective of an impulse wave is to advance the price of the stock. The objective of a consolidation wave is to unwind any overbought conditions that were created during the advance and, more importantly, set up the next advancing impulse wave. The alternating wave structure creates the necessary building blocks to fuel a sustainable trend.
This wave structure not only identifies the direction that the price is travelling in, but it’s also instrumental in generating a potential price objective. In my previous report about this stock, I outlined that it is not uncommon for impulse waves that are separated by a consolidation wave to mirror each other in terms of length. This is how I generated the original $87.00 price objective.
If the current consolidation wave that is in development resolves itself in a bullish manner by exiting the wave in an upward direction, it would suggest that a new impulse wave is set to develop. This new impulse wave will have a potential price objective of $115.00, which is in spitting distance from the all-time high of $119.47.
This entire bullish advance in Zebra stock was support by a golden cross that was generated in September 2016. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red).
This signal is used to confirm that a bull market is in development. ZBRA stock is trading above both moving averages that generated this signal. It suggests that this signal is firmly intact, which reinforces the view that higher prices are likely.
Bottom Line on Zebra Stock
I am bullish on Zebra stock because the price action and technical indicators on the ZBRA stock chart support this view. I will remain bullish on ZBRA shares as an investment until there are indications that another view is warranted.