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Stock photo of a satellite dish. (Peter Petto/Getty Images/iStockphoto)
Stock photo of a satellite dish. (Peter Petto/Getty Images/iStockphoto)

Schizas`Mailbag

This communications stock is holding on to a thin ledge of support Add to ...

Hi Lou,

Would you comment on C-Com Satellite please? It has retreated lately. Is this a buying opportunity?

Rous

Hey Rous,

Thanks for the assignment.

C-Com Satellite Systems Inc. provides mobile two way satellite antenna systems that are used for emergency communications and secure internet access. On the company website there a number of case studies on how different clients have used C-Com systems to solve their unique challenges. On Oct. 16, the company reported third-quarter results that boasted increased revenue and profits. As exciting as that may be, keep in mind that CMI has a market capitalization of $61.92-million and average daily volume of 87,505 shares over the last three months, both of which add a layer of risk to the investment.

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An examination of the the charts will identify if the stock is currently offering a buying opportunity.

The three-year chart tells the story of a stock that has been very generous to investors who caught the ride early in 2013 as the shares began an aggressive advance. The shares really started to gain momentum in March of 2013 as they broke above resistance at $0.80 and rode support along the 50-day moving average to a 52-week high at $2.37 in October. However the stock has been pulling back over the last four weeks and has breached the uptrend that started in March. Notice the retest of support in the $1.75 range.

The six-month chart provides a close-up of the break below the uptrend line and the breach of support along the 50-day moving average. The RSI and the MACD both signalled a sell as the stock hit the 52-week high and they continue to indicate that a reversal of the downtrend has yet to form. What is clear from this chart is that support in this range has to hold or there will be a retest the thin ledge of support at $1.50. What is also noticeable is the development of a range bound pattern with support at $1.75 and resistance at $2.00.

If you have an appetite for risk you might try to trade CMI in this tight range but don’t expect a return to a sustained uptrend in the near term.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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