Sprint Nextel (S) hasn't closed above $3 since October 2011 despite several occurrences of being close. On Monday the stock opened far above $3 at a price of $3.06 but then sold off throughout the day, once the price was surpassed. Therefore, it is safe to say that $3 is a significant psychological point of resistance for Sprint, one that is perhaps keeping the stock from breaking out. With that being said, the stock is trading in a bullish uptrend, but in order to continue it must break this level of resistance. And if so, the stock could trade much higher as the company's outlook is now looking brighter than ever.
Last weekend I was at Best Buy (BBY) purchasing the iPhone 4S as a gift for my father, and as I was checking out I decided to ask the sales rep about the trends of sales at that particular store, a store that is always packed. I saw the Sprint iPhone poster and asked the person if he sold a lot of iPhones for Sprint. He said , "Yeh". I asked, "which sales the most?" He responded by saying, "they all have their perks AT&T (T) has the best network, Verizon (VZ) has the best service, but we sell more Sprint because it has the cheapest deposit requirements."
There is nothing fancy about Sprint, but it does offer unlimited data and is the cheapest overall plan for the user who is not constantly glued to their iPhone. The company has made substantial progress over the last year, and although its debt is mounting, I believe the iPhone experiment will be enough to allow Sprint the opportunity to compete with the likes of AT&T and Verizon and once again become profitable.
In the last three months both AT&T and Verizon have broken into new territory and are trading at 52-week highs. Meanwhile Sprint is once again attempting to cross $3 but is still trading with a 43% loss. To me this is unexplainable. I personally find value by asking myself a very simple question when performance such as Sprint's occurs. I ask myself, "Is the company worse today than it was one year ago, and if so, then by how much, and how does it affect the company's future?" Everyone identifies value differently, but in my opinion, with the iPhone, Sprint is worth twice as much as it was last year. It now has a product to encourage growth that will draw people to its services, which are services that are very attractive to some people.
Sprint is now presenting a bullish trend, of higher highs and lows over the last month. From April 23 till May 18 the stock created a bottom level support at $2.35, and then on May 18 it began to trade higher.
As you can see from the above chart and table, the stock is posting higher highs and lows, and is apparently trading in an uptrend at this moment. Sprint hasn't closed above $3 since October 6, but has reached a price over $2.85 on seven different occasions. Therefore creating a very strong psychological resistance level at $3. I am curious to see what happens in the next two days. If the stock can close above $3 it could very well reach $3.15 without any resistance. But if it fails to surpass $3 then it could be more of the same, and this stock could trade back lower and break the trend. Only time will tell, but it is definitely worth watching.
Disclosure: I am long S.
Additional disclosure: The material in this article is for informational purposes only and should not be used to make any investment decisions.