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A Global Economic Recovery Play

Fundamental and technical conditions for a reversal in Staples present


Staples Inc. (NASDAQ: SPLS) — This office products supply company with customers in 25 countries throughout the world should benefit from the global economic recovery.  

SPLS had a selling climax in late August that turned out to be part of a classic chart formation — the head-and-shoulders bottom or reversed head-and-shoulders. 

Note that all of the conditions of a reversal are present: The burst of selling on the left shoulder, a high-volume climax just before the head, and finally, heavy buyers on the move up to the right shoulder, followed by a burst of energy through the neckline. 

The target is calculated by subtracting the low at $17.45 from the penetration point at the neckline at $21.25 = $3.80, plus $21.25 = $25.05. 

As the economic picture improves, SPLS will likely have its earnings forecasts increased and its former high at $28 exceeded. SPLS is recommended as a long-term purchase and trade to $25.

Trade of the Day - SPLS Chart

Trade of the Day Chart Key

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