Sprint Is a Strong Buy, but the Name Is Still Overbought

By ChartLabPro.com  OCT 04, 2012 3:00 PM

Much anticipation surrounded a possible deal for this telecom stock -- but this deal may now be off the table.


MINYANVILLE ORIGINALChartLabPro.com wanted to take a look at Sprint (NYSE:S) after the volatile ride the stock has had over the last couple of days. Back on September 19, we highlighted the fact that Sprint was overbought around the $5.25 level.  Fundamental investors will now say that the stock has pulled back 30% from its high as a result of the increased price appreciation, which is based on increasing fundamentals and anticipation of doing a deal that now seems to be off the table. This afternoon, it was reported that Sprint was considering making a rival bid for MetroPCS Communications (NYSE:PCS) which yesterday announced a merger with T-Mobile USA, a subsidiary of Germany's Deutsche Telekom (ETR:DTE). This is all correct; however, this is a reaction to a negative catalyst.  If the stock was not overbought to begin with, we would have not seen a 30% pullback.

More importantly, what do you do now with the name? We still have a Strong Buy (5 rating), but the name is still overbought. If we can see a neutral rating on our countertrend coupled with a Strong Buy, we would look to get long again. We do not know what the price will be until we get that neutral reading, and we will alert readers at that juncture.

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