On the first night of class, every semester for the past 20 years I tell my students at Baruch College in New York City that there are three points of logic behind technical analysis: 1) the market is a discounting mechanism; 2) history tends to repeat itself; and 3) prices trend. I have to do a little selling and convincing to illustrate points one and two as they have been exposed to fundamental analysis, but I can easily use a chart of Intuitive Surgical Inc. (ISRG) to explain the last point. Prices trend and we can profit by identifying trends and investing in them.
Let's take a look at the charts of ISRG this morning and I promise, I will not give you a quiz later.
In this daily bar chart of ISRG, below, we can see that prices are close to a double from their lows in December. Can you see the uptrend? Plain as day. Prices have stayed above the rising 50-day moving average line for most of the past 12 months. A bullish golden cross of the 50-day and 200-day averages can be seen in late February. The daily On-Balance-Volume (OBV) line has been rising the entire time and tells us that buyers of ISRG have been more aggressive than sellers. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been above the zero line since early January, which is positive, but recently this indicator has crossed to a take profits signal.
In this weekly bar chart of ISRG, below, we can see how prices based around $160 before breaking up to the upside in early 2016. Notice how prices stall a little around $320? This was a double from the base at $160. Prices are above the rising 40-week moving average line. The weekly OBV line has moved up strongly from early 2016 to confirm the advance on this timeframe. The weekly MACD oscillator is in a strong bullish mode.
In this Point and Figure chart of ISRG, below, we can see a potential long-term price projection of $531.
Bottom line: ISRG is clearly in an uptrend -- a pattern of higher highs and higher lows. A close below $350 would beak the last low I see on the daily chart. That is what I would risk to go long ISRG at this juncture.