Sierra Wireless needs to break above resistance before it’s a buy

Feb 29th, 2012 – Comment

The MACD and the RSI are not generating clear buy or sell signals at this point in time so its best to wait for a more definitive indication of trend.


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Lou,
How would you rate SW ???
Outlook for next Q’s seem to be positive, according to their last Webcast..
What do you think???
Thanks
Peter

 

Hey Peter,

Thanks for the assignment. Sierra Wireless Inc. (SW TSX) is in the business of providing hardware and software solutions that support the mobile computing and the machine to machine needs of their customers. The company generates close to $600 million a year in revenue and has been in business since 1993. I can recall back in 1999 when the shares of SW traded above $200.00. Sweet as that was it is unlikely that we will see those highs anytime soon. An examination of the charts will help layout the case for and against this investment.

 

 

 

 

The three-year chart indicates that there is long term support at $7.00 and that we may have seen a break in the downtrend that started in early 2011 when the stock traded at $16.00. Clearly visible is the double top that formed in January and February of last year. A double top is a reversal pattern that warns investors that it is time to pay attention and to mind their assumptions about a further rise in the share price. In addition the MACD and RSI both generated sell signals as we came into January. The gap down to $11.00 in early February and the death cross that formed in March led to the lows of $6.20 by November. The double bottom that formed with the retest of $6.20 in December set up the advance to over $8.00 in February of 2012.

 

 

 

 

 

 

The six-month chart outlines the move through the 50-day moving average after the formation of the double bottom. The 50-day moving average that had provided resistance is now providing support. The next level of resistance is along the 200-day moving average where the advance stalled. The MACD and the RSI are not generating clear buy or sell signals at this point in time so its best to wait for a more definitive indication of trend. If SW makes its way through $8.50 convincingly and the 200-day moving average flips from resistance to support then a lot of the risk will have been removed. Until then it’s a hold not a buy.

 

Make it a profitable day and happy capitalism!

 

 

Categories: Telecommunications
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