“Spread your wings with Spreadtrum.” Try saying that three times fast without stumbling all over your tongue.
I’d venture to say it’s nearly impossible, but trying to do just that might make the stock stick in your head, and I suspect getting stuck on Spreadtrum Communications (NASDAQ:SPRD) here could make you a very happy trader in the months ahead.
Spreadtrum Communications is one of those companies in the right place at the right time, and for traders looking to make big gains, this is precisely where you want to be. The company designs mobile computing chips, which is a fancy way of saying its processors are used in devices such as smartphones and tablet computers.
Given the burgeoning demand for mobile computing devices worldwide, it’s certainly the right time for SPRD. Perhaps more importantly, SPRD is a Chinese company that sells much of its products in China. That also makes this the right place for SPRD, and the latest China cell phone user data out of the world’s second-largest economy.
On Wednesday, SPRD shares spiked to their highest level in more than four months when the world’s largest mobile carrier, China Mobile Ltd. (NYSE:CHL), reported that its 3G mobile user base jumped the most on record in February. On Tuesday, China Mobile announced that it added 9.5 million 3G subscribers during the month, a monthly record.
Click to Enlarge The chart here of SPRD shows the spike above the 200-day moving average.
There’s been a bit of a trading pullback Thursday in the stock after Wednesday’s near 8% spike, which is understandable. However, I think smart traders can see another 20% upside in this high-flying China tech play. Certainly, the shares are capable of vaulting past the 52-week intraday high of $23.20, which is about 19% higher than the current trading price of $19.47 (as of March 21).
Finally, given the volatile nature of tech stocks, and particularly China tech stocks, you’ll want to be sure and put a stop-loss order in around 7-8% below your buy price just to protect yourself if the buying momentum subsides.
At the time of publication, Jim Woods did not hold a position in any of the stocks mentioned here.