Friday, February 1, 2013

Sprint

Sprint, S, appears to be in the handle phase of a cup and handle pattern.  Weekly chart below.

www.freestockcharts.com

You can see a fairly well defined top at about 6.00, this is the key area that needs to be overcome to confirm the cup and handle. A cup and handle is essentially a rounded bottom with a period of horizontal or slightly negative movement before the break out. Once S breaks out through the top the next resistance point would be around 9.50. Big thing to watch on this trade is a fake breakout, label "Spike, 6.50" shows what I'm talking about. A way to mitigate risk from this is to consider only a break above 6.50 as a confirmation of the pattern. Remember that a break is based on closing price and not high/low price. If S does not break out the top it could fall a bit, major support at the 34 day river, the 100 day, and the bottom of the cup (2.10-2.20). If S falls down to this area it could be an attractive buy so long as it doesn't go lower than 2.00. I would consider it to be in a rectangle if it returns to those lows. The rectangle would most likely act as a bottom rather than a continuation of the previous downtrend.
One thing I want to talk about before the trading points is the cup and handle that S is in. Cup and handle is a variation of the rounded bottom. I talked about rounded bottoms a bit in my RIMM post. The bump, labeled as "Bump", is a semi-common feature of this type of bottom. Price action will begin to move up and appear to invalidate the rounded bottom, it usually won't move too high up, and will then come back down and continue the bottom. There isn't really a good way to trade them; you can't predict when they'll happen or how high they'll go. There is probably some potential to short the bump but the risk level wouldn't be worth the potential gain. Anyway, here are some hypothetical trading points.

Entry1: 6.10, 6.50 (a break of the cup, 6.50 is the safer entry)
TP: 9.50 (Holding longer could see 11.10 or 15.50 as good TPs but the time involved makes prediction a little messy)
SL: 5.25, 4.80, 4.50 (5.25 is the best of those but the lower ones would help prevent getting stopped out on a false failure)

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any S and do not plan on buying any within the next 72 hours.

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