Back in April, I wrote about 3D Systems (NYSE: DDD) and a technical pattern on its chart that indicated the stock was about to begin a new uptrend that could see the stock price rising 168% or more.
The technical pattern discussed in the article—which is available here—was the contracting triangle, a continuation pattern that indicated that once the price broke out of the pattern, a new uptrend would begin for DDD.
So where is DDD today? Well, by the first week of May, not even two weeks after writing about the stock, the price had broken out of the contracting triangle pattern and was beginning a new uptrend. Within days of the breakout, the price rose nearly 40%.
But if you’re reading this and kicking yourself for not buying DDD back then, I have good news for you.
After rising 40%, DDD began an A-B-C corrective pullback.
This is a classic Elliott Wave correction pattern following an impulse wave like the one coming out of the contracting triangle I wrote about in April.
Now, corrections are a hell of a thing, but they also give investors a good second chance to get in on an uptrend they missed buying into, or an opportunity to increase an existing position.
What’s compelling about buying DDD now is that the price is nearly at the 61.8% retracement of the impulse wave out of the contracting triangle, and also almost exactly the price the stock was when it broke out back in early May.
If I’m correct and this is the end of this correction, the uptrend will resume and could reach the target price I identified in my original article of $41. From today’s price (Friday), that’s a return of nearly 132%.
What’s even more compelling about buying DDD now is that this new uptrend isn’t just based on the company itself showing progress, the whole 3D printing industry is finally reaching a sweet spot between supply and demand. Prices for 3D printers have been falling for years which has seen demand rise year after year since 2014, and the continuously growing demand has begun to result in real earnings.
The 3D printing industry is a perfect example of the market getting ahead of itself. In 2013, the 3D printing industry’s bulls were touting adoption at a pace that wasn’t realistic, and when investors grew frustrated by not seeing the industry moving as fast as had been hoped, they threw in the towel and haven’t taken a second look at companies like 3D Systems.
But the euphoria the market had for the 3D printing industry in 2013 is the kind of excitement it should be feeling now. The applications for 3D printing are growing at an astounding speed—a look at 3D printing’s uses in the healthcare space is exciting enough on its own—and adoption of the technology has been continually rising and is expected to continue to rise at an even greater speed.
It was never a lack of growth that sent 3D printing stocks tumbling, it was the terrible timing of the hype around the industry. DDD not only survived the fall and has come out the others side in better shape fundamentally, the company is now profitable, but the technical picture looks good as well.
DDD’s 34.97 forward P/E is expensive by just about any measure, but a P/E this high can be justified when a high level of future growth is expected, as is the case for this industry and this company. And considering the technical picture, I’d suggest ignoring the higher P/E and getting in on what could be a strong uptrend over the next 12 to 18 months.
As always, do your due diligence before taking a position in DDD. The 3D printing industry promises to be a huge industry in the future, and DDD is one of the most dominant players in the space and is giving technical clues that say now is a good time to buy.