Nokia's (NOK) bullish move through the summer appears to have tapered off. But will the Lumina 920 give it new life this autumn? With competition kicking in and Microsoft's (MSFT) other alliance, it may prove difficult.
Lumina 920 Launch
AT&T (T) will be launching its flagship smartphones for the holidays in October and Nokia's Lumina 920 will be one of them. The actual launch date is Oct. 21.
What does one do when your "only true love" is promiscuous? This is exactly what Nokia feels like as Microsoft jumped into bed with HTC, a smartphone manufacturer out of Taiwan. The company is presenting two phones this fall it is calling Windows Phone 8S and Windows Phone 8X, and needless to say Microsoft is behind the operating system. Are these two products innovative of nothing but re-brands of existing products? Claiming to be "signature devices" for the Windows 8 Phone, they appear similar to Nokia's Lumina. Tierman Ray wrote an article about the phones and said this about the similarities:
Like the Lumina, the 8X and 8S have brightly-colored frames made of polycarbonate. Rather than being bricks slightly curved at the sides, like the Lumina, the 8X and 8S have curved backs and tapered edges.
Traders May Still Not Be Bullish on the Stock
Recently, 6,525 April 3 calls were sold for the bid price of $0.60. The volume was more than twice the open interest in the strike at the start of the day, so this is a new position. The call selling is a bet that Nokia won't see much upside beyond $3. The options were likely sold against long shares as a covered call position, which would be bullish up to the strike price but would not partake in gains beyond that level. It does not look like there is too much optimism for this stock to perform well over the next six months, even with the Lumina.
Click to enlarge image.
After a hopeful rise through the ranks from mid-summer on, it looks like Nokia man once again be in a bearish pattern. It is too early to tell for sure, but its nice five-week climb ended the last week of August. As it starts to redefine its direction for us, it has established one low point at $2.25 and recently also set a lower high. Will it continue to move down? The RSI is not revealing anything out of the ordinary. It is following Nokia.
The Bollinger Bands are moving sideways now. If we look at the bands and also at the 50-day MA, we might observe a possible support at the 50-day MA with the stock trading in a neutral channel. It is too early to tell for sure, but this is one outcome just from my observations. The MACD is giving us a standalone negative divergence, which I have observed as a fairly accurate indication that the stock in slowing down and looks as if it will consolidate for a period of time. I would want to see a negative divergence in the RSI to support and confirm a turnaround in order, but it does not show that here. On a weaker note, there is also the possibility of a head-and-shoulders reversal pattern forming. If this is the case, it has a very high reliability rating as a reversal pattern. Investors should keep this in mind.
The Options Trade
Presently trading at $2.85, I am mildly bearish on the stock. At this point, with the Lumina coming out this fall, I would pick a trading channel for the stock by buying a straight-up 2.5 put option with an expiration of January 2013.
Reasoning Behind the Trade
This is well within the trading channel, and I believe the stock will move down to that level before the expiration date.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.