Sprint Corp (NYSE:S) shares have gained 20% so far in 2016, putting Sprint stock among the strongest performers in the U.S. stock market. Telecom stocks thematically are working well this year, as their relative defensive nature is an attractive feature to many investors.
However, while S stock has already showed a good upside move this year, the charts indicate more strength ahead thanks to shares recently overcoming an important technical hurdle.
Before looking at the charts, allow me to remind you that as a general rule of thumb, I’m not a big fan of trading sub-$10 stocks. In some cases, liquidity can be an issue. But more importantly, such stocks tend to be subject to sharp moves on even the smallest of rumors. To be clear: I don’t think Sprint stock falls into this category (it’s not your average cheap stock), but it’s an investing mindset worth adopting.
Sprint Stock Charts
On the multiyear weekly chart we see that S stock has largely found itself in a clear downtrend that just this past January saw it fall to fresh all-time lows.
However, Sprint stock has significantly slowed its rate of decline since early 2015, and by marking a few lines on the chart, we can quickly see how a bottoming phase may have indeed been built over the past 18 months or so.
Note that while S stock did break to new all-time lows in January by snapping the red dotted horizontal line, it didn’t stay below this line for very long. In fact, by the latter half of February, Sprint was once again trading above there. After a few months of sideways consolidation, S shares rallied strongly last week, and by doing so broke above their yellow 50-week simple moving average and the diagonal resistance line on the chart.
The breakdown fake-out move in January combined with last week’s breakout to me signals further upside in Sprint stock in the intermediate-term.
On the daily chart, we see that although S stock broke back above its red 200-day SMA just last week, it had been holding nicely above its yellow 50-day SMA since late February. On this chart, last week’s breakout is more visible.
It does not take to much imagination to see Sprint stock continue its ascent toward the $5-$5.50 area, which would see a revisit of the reaction highs from last September and October.
Any violent break back below the $3.70 area on a weekly closing basis would call off this current bullish tone in S stock.
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