3 Bullish Chart Patterns for the Long-Term Investor
It's more common for long-term investors to rely on fundamental or quantitative analysis-or some combination thereof. But that doesn't mean technical...
It's more common for long-term investors to rely on fundamental or quantitative analysis—or some combination thereof. But that doesn't mean technical analysis can't also be used to guide a buy-and-hold strategy.
One of the most popular way to use technical analysis is to look at moving averages. These trend lines smooth out the path a stock has taken and can be a valuable indication of where it is headed.
Then there are classic chart patterns that point to where a stock may be headed based on the convergence of multiple trend lines or other common charts "shapes'. At the long-term end of the spectrum, such patterns typically form during a period of at least nine months—and sometimes up to two years.
Let's take a look at three stocks that have recently formed bullish chart patterns. In combination with healthy fundamental backdrop, these names look worth hanging onto for the long haul.
Is FedEx Stock a Buy Under $300?
Last July, the 50-day moving average line for FedEx (NYSE:FDX) crossed over the 200-day moving average. The bullish long-term crossover was preceded by a heavy volume gap-up event on July 1st that offered the first clue that the shipping leader was on the road to recovery.
Since then, FedEx has largely received support at the 50-day line except for an early 2021 dip that it recovered nicely from. Over the last couple months, the stock has taken a breather from setting an intraday record high of $319.90 on May 27th. The sideways pattern of consolidation is likely the formation of the next base from which a fresh record high will be reached.
In the middle of the consolidation on July 9th, a continuation diamond pattern formed on the daily chart. It took roughly 15 months to form, but the breakout on that day suggested that the prior uptrend would continue. If the pattern holds, FedEx could climb as high as $390 over the next 6 to 9 months. This level is not far off from the Street-high $397 price target offered by UBS.
Will Align Technology Stock Keep Going Up?
Align Technology (NASDAQ: ALGN) has been one of the best large-cap health care stocks to own. After soaring 92% last year, the maker of Invisalign "invisible' braces has rallied another 15% in 2021. Based on a recent chart pattern, there's good reason to believe it can continue moving higher.
Interestingly, a continuation diamond pattern formed on Align's daily chart on the same day as it did on the FedEx chart. The continuation diamond is a classic chart pattern that starts with a downtrend of higher highs and lower lows. This is followed by a narrowing of the trading range and eventually an upward break out of the upper portion of the resulting diamond shape.
In the case of Align, the pattern took a bit longer to form but packs an equally potent punch. If the prior uptrend resumes as predicted, the stock could be on its way to the $763 to $794 range within the next six months.
Align looks like a long-term buy from a fundamental perspective as well. The company is producing some impressive growth again now that many dental offices are back in full swing. Healthy demand for its popular clear aligners and iTero scanning technology is forecast to drive 54% sales growth this year. With the company slated to report Q2 earnings next week, it looks like a great time to bite into some Align shares.
Is it a Good Time to Buy DaVita Stock?
DaVita (NYSE:DVA) is another health care stock with positive fundamentals and technicals in its favor. The company is a leader in the field of dialysis services for patients with chronic kidney failure. It operates kidney dialysis centers across the country that together generate steady sales results. Add in an improving cost structure and opportunities for expansion and it's easy to see why the Street is forecasting strong profit growth over the next couple years.
Technical analysts are also expecting big things ahead for DaVita. The stock has been in a solid uptrend mode since June 2019 that was only moderately slowed by the pandemic downturn. After climbing to yet another all-time high in early May 2021, it has been building the base for the next leg up.
On Monday (July 19th), DaVita dipped below the lower end of the Bollinger band. This showed that the move was unusual given the historic volatility of the stock and that it was due for a turnaround. The last time this happened in February 2021, DaVita went on a run from approximately $100 to $130. We may see a similar gain in the coming months.
Earlier this week the analyst at Deutsche Bank gave DaVita a $207 price target that well exceeds the rest of the Street. He noted "the company isn't yet fully understood by investors". This amounts to more than 70% upside for the large cap medical play. The fundamentals and technicals seem to be well aligned on this one too.
FedEx is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
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