Neutral Tandem has a double bottom on the chart

Oct 21st, 2010 – Comment

From the technicals it appears that TNDM still has some gas in the tank so if you like the story then buy a ticket for the show.

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Hi Lou,

What do you think of TNDM-Q? They’ve just started to turn up do you think this can be sustained?

Thanks, Brett

Hi Brett,

Thanks for the assignment. Neutral Tandem Inc. ( TNDM NASDAQ) provides tandem services to telecommunications carriers so that they can interconnect their networks without going through the incumbent local exchange carrier. The end results are lower costs and faster speed.  The charts for TNDM are generating some interesting signals that are worth investigating.

The three year chart illustrates the struggles that the company has endured since it topped out at $34.00 in September of 2009 and began the big slide to $10.50 in August of 2010. When I was speaking to the Greater Dufferin Home Builders Association this week I spoke to a chart very much like this one and made the comment that you don’t have to ride it to the bottom like Slim Pickens in Dr. Strangelove.

The long tenure of the decline offered lots of opportunities to get off the ride and preserve capital. It took just over a year to grind shareholder value down by 69%. The death cross in October of 2009 was another sign the worm had turned and the hope of a quick reversal of the downtrend was false. At that point the loss would have been 29% from the high of $34.00 but that would still have been a bargain compared to the rock bottom of $10.50.

But that was then and this is now and right now the downtrend is broken and there is a double bottom in place. A double bottom is a reversal pattern that signals that the sellers have capitulated and the buyers are circulating.

The six month chart provides a better view of the double bottom and the move through the 50 day moving average and the 200 day moving average. The MACD signalled the change in momentum in mid September which carried the stock from $10.50 to $14.29. Not a bad run so far.

TNDM has moved pretty far pretty fast which would suggest that it might have to take a breather and slow down the pace a bit. There is  some fairly strong overhead resistance at $16.00. After that resistance comes in again at $18.00 and then at $20.00.

TNDM has made the first move breaking the downtrend and advancing as aggressively as it has. From the technicals it appears that TNDM still has some gas in the tank so if you like the story then buy a ticket for the show.


Categories: Telecommunications
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