BIOS Stock: Has a Bull Market Begun Its Development?
I have good and bad news to share. Let’s begin with the bad, and get it over with.
October was a terrible month for the stock market. The sell-off that struck the market has done such a degree of technical damage to the major market indices that I no longer believe a bull market is in development. Instead, I believe that the market is currently in the process of putting in a significant top.
Now that I’ve gotten that out of the way, let’s focus on the good news.
Now that October is behind us, we have entered a season where stocks tend to outperform. This may seem like a contradictory statement, so let me explain. Market tops are usually broad. Therefore, they take time to develop because not all stocks top as the same time.
So even though I might be bearish on the markets in a general sense, it doesn’t mean I cannot be bullish on stocks that are still poised for further gains. This is especially true during the seasonal time of year we are currently in.
A company I am really intrigued with at the moment is BioScrip Inc (NASDAQ:BIOS). The reason why BIOS stock has caught my eye is because it is attempting to break out of a very large technical price pattern.
A successful breakout of this pattern would suggest that much higher BioScrip stock prices are likely to follow, which is why this stock is worth watching at this moment.
The very large technical price pattern I am referring to is highlighted on the following BioScrip stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the BIOS stock chart above is an ascending triangle. This technical price pattern is created when the price action is characterized by a consistent static high and a sequence of higher lows.
Connecting the price action that characterized this price pattern is how I captured this price pattern. The trend lines pinpoint where significant levels of price support and price resistance reside. This is very pertinent information because this pattern will only be completed once one of these levels is breached.
Triangles are very special price patterns because as they develop, the confinement of space between price support and price resistance causes energy to build within the pattern.
This stored energy is finally released when the pattern is completed, and a powerful move is expected to follow. The size and scope of the move that follows is directly related to the size of the pattern.
The pattern in question has been in development for two years, and the range between price support and price resistance has contracted significantly over this time frame. A powerful breakout is now imminent, which is why I am suggesting that BIOS stock is currently worth watching.
Even though the pattern has not been resolved, I have the inclination to believe that a bullish breakout is now likely. The reason being is that a long-standing bearish signal has finally swung into bullish alignment. This event is why I believe a bullish outcome for BIOS stock is likely.
The signal I am referring to is highlighted on the following BioScrip stock chart.
Chart courtesy of StockCharts.com
The signals I am referring to are created when the 50-week and 200-week moving averages cross.
When the 50-week moving average crosses below the 200-week moving average, it creates a death cross. This ominous-sounding signal suggests that a bear market has begun its development.
A death cross was generated on the BIOS stock chart in July 2014. True to its nature, lower BIOS stock prices did prevail. By December 2016, BioScrip stock had shed 86.86% of its value. This is was almost a complete loss, so it’s fair to say that the name this signal was given was a fair interpretation of what follows.
The complete polar opposite signal is created when the 50-week moving average crosses above the 200-week moving average. This signal is called a golden cross and it suggests that a bull market has begun its development.
The reason why I believe that the ascending triangle currently in development is likely to be resolved in a bullish manner is because a golden cross was finally generated in October 2018. This negates all the bearish implications that preceded it, while simultaneously suggesting that a bull market in BioScrip stock is now in development.
I am watching the price action on the BioScrip stock chart with great anticipation because it is on the verge of completing a very large technical price pattern. Once this pattern is completed, a powerful move in BIOS stock is expected to follow.
Check out the original article here.
Author: Patrick Brik, BAS, CFA, CMT