TWOU Stock Forges a New All-Time High and These Are the Implicati…

TWOU Stock: A Bullish Trend Flexing its Muscles

The calm and collected low-volatility environment that dominated the trading action in 2017 has quickly evaporated in 2018 and a sharp sell-off has gripped the markets.

The selling pressure has left many wondering if this is the beginning of something more ominous, while others are claiming that this sell-off is nothing more than a much-needed and overdue correction. I could see why some are pondering a bearish view because of the ferociousness of this sell-off, but I continue to hold my position in the bullish camp.

My basis for holding a bullish view is quite simple. I have seen a number of market sell-offs, and there have been a number of indications generated during this sell-off suggesting that it has run its course, and that it is only a matter of time before the markets find their footing and higher stock prices prevail again.

My propensity to believe that a bull market is still in development is why I am currently focusing on 2U Inc (NASDAQ:TWOU) stock. I believe that TWOU stock is a good proxy for the overall stock market and, as long as it continues to move higher, so shall the market.

I have been bullish on this investment for quite some time, and the fact that 2U stock has just forged a new all-time high happens to reinforce my view that this recent sell-off is just a healthy and necessary correction.

My bullish view on the stock was established when the following technical price pattern was completed.

Chart courtesy of StockCharts.com

The pattern highlighted on the 2U stock chart is a cup and handle.

This pattern develops because a significant level of price resistance which resided at $39.50 prevented the TWOU stock price from advancing. The significant level of price resistance was first established in August 2015, and it served to contain the stock price from advancing for 1.5 years.

While 2U stock was trading below this level of price resistance, it created two distinct troughs, with the first trough being much larger than the second. These troughs are what define the cup and handle pattern.

In April 2017, TWOU stock broke above resistance, completing the cup and handle price pattern and suggesting that higher prices were on the horizon. I have been bullish ever since.

This notion was confirmed in April 2017 when 2U stock returned to test the significant level of resistance from above. This type of price action is very common,  and it is called a backtest. A backtest serves to reaffirm that the break above resistance was legitimate while simultaneously establishing it as a very significant level of price support.

Since this feat was accomplished, higher stock prices have prevailed and the following stock chart illustrates the bullish trend that followed.

Chart courtesy of StockCharts.com

This 2U stock chart illustrates price action consisting of a series of higher highs and higher lows, and it is the quintessential feature that characterizes every bullish trend.

Defining this bullish trend was accomplished by connecting the series of lows that characterized it, which created an uptrend line. The uptrend line acts like a level of price support, and every time it has been tested, buyers have stepped in to support it.

This trend line had been tested numerous times and, just based on the points of contact, its significance is hard to refute. Add in the fact that the bullish trend began long before the cup and handle price pattern was completed, and it only adds to its significance.

The recent market sell-off has caused this investment to swoon, but the uptrend line has acted like support, as it has on many occasions. Following this test, 2U stock has surged higher and has managed to forge a new all-time high, illustrating that this bullish trend is still strong and in development.

It reaffirms my view that the pullback in the market indices was just a required correction, and that higher prices will once again prevail.

Analyst Take

2U stock has just forged a new high, and this comes off the heels of a significant correction in the equity markets, suggesting that the bullish trend in TWOU stock is strong and still in development.

Since I am currently using 2U as proxy for the market, this feat is simultaneously suggesting that the market sell-off was just a much-needed correction, and that higher prices will prevail.