Global mobile phone manufacturer and telecom equipment company Alcatel-Lucent (ALU) is a tale of two tapes. What once (pre-merger of Alcatel and Lucent Technologies) was a cult stock with an interesting business in the late innings of the ’90s has since turned into a company operating a commodity business with thin margins — and a stock trading below $3.
For perspective, see the below chart of this falling star, looking back to the late 1990s:
While this ultra-long-term chart is nice for perspective, it doesn’t help us much for technical analysis in the near- or even medium-term. As such, I zoomed in on the chart to capture the price action since mid-2008, which give us the first defined reference line of resistance near $5.70. While this level is still far away from ALU’s current price. it is worth noting that Alcatel-Lucent recently pierced above its 200-week moving average (red line) and now again trades above this line for the first time since July 2011.
Even closer-up on the daily chart of Alcatel-Lucent, note that the stock has already had a big run off its October 2012 lows, which to date adds up to a more than 200% gain.
In early August, ALU broke above a horizontal resistance line that dates back to February 2012. However, the breakout was soon thereafter followed by a consolidation period in recent weeks, as Alcatel-Lucent based above this level that previously acted as resistance. When resistance became support, the stock began to trace out a bullish-looking pattern, which ultimately led to a powerful breakout to new year-to-date highs.
As such, on Tuesday, ALU jumped more than 11% to $2.87, breaking out of the bullish consolidation phase on massive volume. Thus, the stock staged yet another breakout that is clearly visible on both the daily and weekly charts.
Given the stair-step approach in which Alcatel-Lucent has been climbing, it now looks to have plenty of more upside over the medium-term.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.