TXT Stock: Awaiting Confirmation
(NYSE:TXT) first piqued my interest in May 2017, when rumors starting swirling that a buyout was in the works. Aside from the initial pop in TXT stock" width="300" height="225" srcset="https://i0.wp.com/investorsbuz.com/wp-content/uploads/2017/07/TXT-Stock-300x225-Small.jpg?resize=300%2C225 300w, https://i0.wp.com/investorsbuz.com/wp-content/uploads/2017/07/TXT-Stock-300x225-Small.jpg?w=640 640w" sizes="(max-width: 300px) 100vw, 300px" />
FOREX INVESTORS Textron Inc. (NYSE:TXT) first piqued my interest in May 2017, when rumors starting swirling that a buyout was in the works. Aside from the initial pop in TXT stock that was a result of the buyout rumors, the trading action has been dull and uneventful.
Ever since that fateful day, I have been watching the trading action in Textron stock because, if the rumors are indeed factual, a substantial move to the upside can be expected.
The following Textron stock chart illustrated the price action which is suggesting that a move is in the making.
This TXT stock chart illustrates that a move has been in development since the stock price accelerated away from the 200-day moving average in October 2016. For anyone not familiar with the 200-day moving average, this key metric is used to distinguish whether an investment is in a bullish state versus a bearish one. Using this metric is quite easy because this moving average acts as a dividing line: trading above the 200-day moving average is bullish, and trading below it is bearish.
Constructive price action consists of two waves that alternate. The first wave, an impulse wave, defines the progression in the stock price as it swiftly stages an advance. The second wave, a consolidation wave, defines a countertrend move that alleviates overbought conditions that were created during the previous impulse wave, and—more importantly—sets up the next advance that will also be labeled an impulse wave. This wave structure is essential in creating a sustainable trend toward higher stock prices.
Something similar can now develop. In order to confirm that a new impulse wave is in development, Textron needs to complete the consolidation wave that is currently in development.
The following Textron stock chart illustrates an indication that has been instrumental in confirming which wave is in development.
This TXT stock chart is used to illustrate how effective the moving average convergence/divergence (MACD) indicator—in the lower panel—has been in confirming which constructive wave is in development.
For those not familiar with this indicator, MACD is a trend-following indicator that is used to distinguish between bullish and bearish momentum, using the crossing of a signal line.
In late October 2016, a bullish MACD cross was generated, indicating that bullish momentum was influencing the TXT stock price, and that, therefore, the stock price was geared toward higher prices. This indicator was instrumental in suggesting that an impulse wave was set to develop, so the rally that followed was no surprise.