I am sure there have been many instances when selling in May has been a good investment strategy, and I am sure this is especially true when the indices are gripped in a bear market.
Am I going to sell in May and go away? Probably not, and for a number of reasons. The first reason is the most obvious, and it is because my livelihood does not allow me to just go away. The second reason is that I am not completely sold on the notion that a saying coined many many years ago is an applicable trading strategy.
I am sure there have been many instances when selling in May has been a good investment strategy, and I am sure this is especially true when the indices are gripped in a bear market. Whether or not this will prove correct this time around remains to be seen. I have stated numerous times that as long as significant levels of price support are not broken, I will continue to believe that higher index values are in development.
This doesn’t take away from the notion that the first quarter was a bad one, and it was very difficult to navigate. So instead of focusing on a stock that I believe is primed to move right now, I am going to focus on one that is worth watching.
The company in questions is Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) stock, and it has been trapped within the confines of a very large technical price pattern. This pattern is very significant and once Corbus Pharmaceuticals stock breaks free from this pattern, the next directional move in CRBP stock will be determined.
This technical price pattern is highlighted on the following Corbus Pharmaceuticals stock chart.
Chart courtesy of StockCharts.com
The completed technical price pattern highlighted on the CRBP stock chart is a descending channel.
A descending channel is a price pattern characterized by price action that contains a series of lower highs and lower lows. If you’re wondering, yes, this price action is the quintessential characteristic that defines a bearish trend.
The trend lines that were used to define this bearish trend were created by connecting the series of lower highs and the series of lower lows. These trend lines pinpoint where significant levels of price resistance and price support can be found.
For instance, price resistance currently resides at $10.00, while price support currently resides at $5.25. As long as Corbus Pharmaceuticals stock is trading in between these price points, the pattern is intact. In order to complete the pattern and negate the repercussions suggested by it, CRBP stock needs to break above price resistance.
However, there is always the possibility that CRBP stock will break below support. The key takeaway is that whichever level is broken, the stock price is likely to continue proceeding in that direction.
I am leaning toward a bullish resolution of this pattern because the price action leading into it was advancing in nature.
The combination of the descending channel and price action leading into it has created a wave structure, which is highlighted on the following Corbus Pharmaceuticals stock chart.
Chart courtesy of StockCharts.com
This CRBP stock chart highlights a wave structure that has been known to create and sustain a bullish trend.
This wave structure consists of impulse waves and consolidation waves, and thus far, it has been responsible for taking CRBP stock from a low of $1.01 in January 2016 to where it currently stands at $6.30.
The impulse waves capture the stage in a bullish trend when a stock sustains a progressive move toward higher prices. The consolidation waves capture the stage in a bullish trend when a stock corrects and refrains from advancing. These waves feed off each other, creating a quintessential characteristic that defines a bullish trend, which is a sequence of higher highs and higher lows.
Breaking above price resistance at $10.00 would complete the consolidation wave and set off a flurry of buying pressure. This buying pressure would initiate the next impulse wave and the sequence of higher highs would continue, meaning that Corbus Pharmaceuticals stock would be taking the next step in the progression of its bullish trend.
I am watching the development of a technical price pattern on the Corbus Pharmaceuticals stock chart because I believe a resolution of this pattern will determine whether or not CRBP stock is likely to sustain a move toward higher or lower prices.