Nokia Pushes Past Technical Resistance, Starts Real Recovery

by Serge Berger | October 30, 2013 8:47 am

beatthebell_185x185[1]Nokia (NOK[2]), the global communications company, announced its third quarter financial results on Tuesday. The company’s quarterly net loss came in at $137.7 million or 2 cents per share; however, that compares favorably to the net loss of $1,180 million or 33 cents per share in the same period one year ago.

Top line revenue fell more than 20 percent to 5.6 billion euros as sales fell for the handsets unit NOK is in the process of selling to Microsoft (MSFT[3]). Nokia said its network operations business saw good profit growth, and the company gave a positive outlook for its overall profit margins once the sale of its handset business is complete. Investors loved the news, sending NOK up 10% to a fresh year-to-date high.

Once the all-star of mobile handsets, Nokia ran into difficulties as it failed to stay on the ball with the quickly changing business as Apple (AAPL[4]) and others drove full steam ahead into smartphones. The stock’s price history paints a clear picture, falling sharply after a dramatic multi-year top in 2007. The bleeding didn’t stop until the summer of 2012, when the stock then slowly began to climb with a series of higher lows and higher highs.

While the ascent from the summer 2012 lows has been steep on a percentage basis (roughly 340%), in the bigger picture the stock has simply carved out a big base (i.e. rounding bottom), which should mean that the stock is really just beginning to climb out of the abyss. With Tuesday’s rally, Nokia pushed above its October 2011 reaction high and continues to look good on the long side.

nok weekly
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On the daily chart, the skies are equally friendly as Tuesday’s rally pushed NOK higher after re-testing a consolidation zone. After a sharp rally in early September, when the deal with Microsoft was announced, Nokia settled into a consolidation phase during the second half of September and first half of October, which then finally resolved to the upside on October 15th. After re-testing this breakout point at $6.75 on Monday, the stock gapped up at the open on Tuesday and never looked back as it closed at a new year-to-date high.

nok daily
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This recent movement is clearly a sign of strength, which — barring any quick and nasty bearish reversal — could move the stock toward the $8.00 area in coming weeks.

Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the “Essence of Swing Trading” eBook by clicking here[5]. At the time of publication, Berger had no positions in the securities mentioned.

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