Editor’s note: Serge Berger, the head trader and investment strategist for The Steady Trader, will be providing the Trade of the Day until Sam Collins returns on July 25.
Dell (NASDAQ: DELL) — With its broad range of products and services, Dell is well-positioned to continue to profit from technology products and services sales. Earlier this week, the company announced it is paying $700 million in cash for Force10 Networks Inc., a maker of high-speed Ethernet networking equipment. The move further shows Dell’s commitment to remain at the forefront of the businesses it is in and to act acquisitive if it finds a good opportunity.
On the weekly chart dating back to early 2008, we note a clear multiyear resistance line at $17.50, which acted as resistance in late summer 2009, in April 2010, and again this week. The more a level gets tested, the weaker it gets, so the probability that the stock will manage to break through $17.50 is increasing. Nevertheless, Dell is up close to 25% this year, so a little breather before it breaks higher may be needed.
Looking at the daily chart dating back to January 2011, note the uptrending channel that has formed since April. If the stock wants to make a serious run at breaking the $17.50 area, the lower support line of this channel must hold as support. Stochastics on the daily chart have come back some and act supportive of a move higher.
While this trade may not be today’s business and Dell announces its earnings in mid-August, a solid daily close above the multiyear resistance at $17.50 on good volume would be bullish. If and when this setup occurs, stops can be set at $16 and final profit targets at $20.
