Technical Analysis: Why Zebra Stock Is Geared Towards Higher Prices

zebra stock
Credits: istock.com/denphumi

ZBRA Stock: This Biotechnology Stock Stands to Benefit

Biotech, biotech, biotech. This group has caught a tailwind, and as the end of the year approaches, I expect exceptional results from this sector. I am focusing on Zebra Technologies Corp. (NASDAQ:ZBRA), which is obviously a biotechnology stock. The reason why I am focusing on Zebra stock is that I have the inclination to believe that this investment will be a beneficiary of this push, and therefore, higher ZBRA stock prices are on the horizon.

These beliefs are not solely based on the sector that this investment is trading in. I have reason to believe that ZBRA shares are set to appreciate because the indications on the company’s stock chart support this view. Using a stock chart to generate a view on an investment is known as technical analysis. This method of investment analysis is based on historical data points such as price and volume, which can be used to forecast what the future may bring.

As a result, my supporting arguments that higher Zebra stock prices are on the horizon are based on the following stock charts.

The first Zebra stock chart illustrates a significant level of price resistance that currently sits at $110.00.

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Chart courtesy of StockCharts.com

The level of price resistance that is highlighted on the chart was first established in June of this year, and for four months, this level of resistance at $110.00 has thwarted all attempts to move beyond it.

This level of resistance has created a trading range that is actually a consolidation wave within a larger wave structure called constructive price action.

This wave structure is illustrated on the following chart.

Chart courtesy of StockCharts.com

What we have here on the ZBRA stock chart is a textbook example of constructive price action. Constructive price action consists of an alternating two-wave structure of impulse waves and consolidation waves, which create the necessary building blocks so a trend can develop and remain sustainable.

The impulse waves are highlighted in green and they define the stage in a bullish trend where the stock price stages an advance towards higher stock prices.

The consolidation waves are highlighted in purple and they define the stage in a bullish trend where overbought conditions are unwound in order to create the correct environment where a new impulse wave can develop.

These two waves, which constitute constructive price action, are dependent on one another, and they are responsible for the current bullish trend that is now in development.

The current consolidation wave defined by the resistance level at $110.00 will determine the next direction this stock is set to take once the wave is completed. The trend that preceded this wave was bullish, and therefore, I have the inclination to believe that this wave will also resolve itself in a bullish manner. A resolution will involve ZBRA stock exiting the consolidation wave in an upward direction, suggesting that a new impulse wave is in development.

My inclination towards higher stock prices is being reinforced by an influential momentum indicator that has an impeccable track record of determining whether a bullish or bearish trend is in development.

Chart courtesy of StockCharts.com

The influential indicator that I am referring to is the moving average convergence/divergence (MACD) indicator located in the lower panel of the ZBRA stock chart. Let me reiterate that this indicator has been instrumental in identifying whether a bullish or bearish trend is in development. MACD is a trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. These momentum indications dictate whether a bullish or bearish trend is in development.

In August 2015, a bearish MACD cross was generated, indicating that bearish momentum was influencing the trading action in Zebra stock. This created a headwind where the path of least resistance was geared towards lower stock prices, and the price action that followed was in line with what this indicator was suggesting.

In November 2016, a bullish MACD cross was generated, indicating that bullish momentum was influencing ZBRA stock. This created a tailwind where the path of least resistance was geared toward higher stock prices, and once again, the price action that followed was in line with what this indicator was suggesting.

The MACD indicator remains in bullish alignment, supporting the notion that higher stock prices are on the horizon. The previous all-time high that sits at $119.47 seems like the next logical objective for the stock.

Analyst Take:

 The indications on the Zebra stock chart continue to support the notion that higher prices are on the horizon. My bullish views on this investment were generated using technical analysis, and until there are indications supporting another view, I will remain with my current bullish outlook on this investment.