Investors in Dish Network would do well to turn off their TV sets and start watching this stock right now, as it is on the cusp of breaking free and developing a longer term trend higher, based on some volume price analysis lessons. And perhaps this is the place to start.
As always in any rally higher, there is selling as profits are crystallized. In such weeks, and where primary indices may also be the driving force, any move to the downside could signal a reversal in sentiment, or at the least a congestion phase to build. However, for this stock, on two occasions where we saw a strong move lower, this was followed by a recovery with the weekly candle closing with a narrow body and deep lower wick, but more importantly with high volume. The first of these occurred in February with the stock holding above $30, and the second last month and on this occasion closing above $34 and balanced on the volume point of control as denoted by the yellow dashed line. Note the volume on both candles, it was high or very high signalling strong buying by what is sometimes known as the ‘smart money’. The last of these reactions has been followed by two weeks of rising price action combined with rising volume.
So where next for this stock, and here we need to focus on the $38 to $42 price area which is positive for investors for two reasons. First, volume on the volume point of control histogram is falling away quickly in this region, and so presents a weak barrier to any move higher. Second, price resistance is also very weak with only two levels in place, one just below $40 and the other just above $42. But notice how thin these lines are. They have only been tested once in the past and therefore represent a weak area of potential price resistance and once broken the next significant resistance and major level awaits at $45 where we have the blue dashed line of the accumulation and distribution indicator. So several positives for longer term investors in this stock. Finally, note the Trend Monitor indicator remains firmly blue confirming the bullish sentiment.
Moving to the EPS reports for DISH, last year was an excellent one with just a miss in the final quarter, followed by a recovery in March as the consensus forecast was met at $0.65, and if last year’s results are repeated, the EPS next time may surprise the markets once again with better then expected data.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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