ZBRA Stock: Charging Ahead
Zebra Technologies Corp. (NASDAQ:ZBRA) stock surged $9.62, or 14.61%, during trading on Tuesday on the back of the company’s earnings report that was released before the opening bell.
Zebra Technologies beat earnings on the bottom line. Consensus earnings were $1.41 and management reported $1.43, beating estimates by $0.02. Management also provided guidance that came in at the high end of projections.
Zebra Technologies stock was setting up a tradable price pattern and a catalyst was needed to complete this pattern. This pattern is completed when a breakout occurs and the price begins to trend. The earnings beat and management guidance were the exact catalysts traders were looking for.
When I am referring to price patterns and breakouts, I am referring to the style of investment analysis known as technical analysis. The basis of technical analysis is that past price data can be used to discern trends and project future prices.
The breakout that sent ZBRA stock soaring is still projecting higher prices.
The following Zebra Technologies stock chart illustrates the price breakout, and the factors that contributed to it.
Chart courtesy of StockCharts.com
The ZBRA stock chart above illustrates a classic setup pattern, in which an initial impulse wave gives way to a consolidation wave, where any overbought condition can be alleviated. These overbought conditions are alleviated as the price oscillates between the support and resistance levels set by the channel that is highlighted above. The price breaks out of the consolidation channel when a catalyst causes the price to close above or below this channel. A breakout indicates that a new impulse wave is now in development.
Healthy bull markets are littered with such price action and, not only is this type of price action significant in identifying a trend, it gives me the ability to produce a price target. The theory behind this price objective is that it is common for impulse waves to match in length and duration. The first impulse wave was $25.00 in length and, using this as my basis, I project a target price of $87.00.
There were other signals that supported this bullish breakout. Shortly after the first impulse wave completed, ZBRA stock generated a golden cross. 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 on the horizon. It is always wise to trade in the direction of this momentum indicator as the bulls are in control and a bullish tailwind has developed.
The following Zebra Technologies stock chart illustrates an indicator on the verge of producing a bullish signal.
Chart courtesy of StockCharts.com
Moving average convergence/divergence (MACD) is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals.
The signal line crossed in a bearish manner in September 2015, and this indicator effectively halted any sustained gains in the price of ZBRA stock. A bearish MACD cross indicates that bulls have lost momentum and that bears are in control of ZBRA stock. As a result, the path of least resistance is lower.
The MACD indicator is converging and a bullish cross can occur in the months ahead. A bullish cross would be great news for the bulls, as this indicator would add further fuel to the rally, and perhaps a test of the previous high of $120.00 that was set in July 2015 is possible.
Bottom Line on Zebra Technologies stock
Although Zebra Technologies’ earnings were not spectacular, they were enough of a catalyst to send ZBRA stock soaring. The projected price objective from the completed technical pattern suggests that Zebra Technologies stock has room to run. As long as the price continues to behave in a healthy manner, I will continue to be bullish on Zebra Technologies.