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Nokia Stock Is a Dog, But It Looks Good for a Trade

InvestorPlace logo InvestorPlace 1/10/2020 Tyler Craig
a tall building: Why 2020 Could Be a Happy New Year for Nokia Stock Investors © Source: Shutterstock Why 2020 Could Be a Happy New Year for Nokia Stock Investors

Nokia (NYSE:NOK) stock has been dead money for a decade. But recent developments on the chart of NOK stock appear to be setting up a bullish trade.  I expect only short-term gains by NOK, so don’t expect any rosy commentary on the ailing company’s chances of reclaiming its former glory.

the tower of the building: Why 2020 Could Be a Happy New Year for Nokia Stock Investors © Provided by InvestorPlace Media LLC Why 2020 Could Be a Happy New Year for Nokia Stock Investors

I lack the necessary boldness or insight to predict that type of resurrection. But NOK doesn’t have to rise to its prior peaks to generate profits for tactical traders. Just small advances will do. Let’s take a closer look at the charts to see what’s in store for NOK stock.

The Big Picture

a close up of a map © Provided by InvestorPlace Source: The thinkorswim® platform from TD Ameritrade

In 2013, NOK stock surged from $3 to $8 in short order. But ever since then, it’s been a steady, consistent return to the abyss. Multiple disappointing earnings reports have sped up the decline, with the last plunge occurring last October.

With such an entrenched downtrend on the weekly chart (see above), it’s impossible to bet on a long-lasting rebound. NOK stock is simply facing too much resistance overhead for that to occur anytime soon. For now, the bulls need to be nimble and take profits when they can.

If Nokia stock rises above $5.85, I would change my cautious tune.  But until then, the weekly downtrend will dominate.

Daily Time Frame

a close up of a map © Provided by InvestorPlace Source: The thinkorswim® platform from TD Ameritrade

The daily view reveals the real reason for today’s bullish trade idea. October’s earnings fiasco left a huge gap in its wake. Gap areas provide interesting price zones to trade against. The easy-to-spot support and resistance levels provide clear entry and exit points. If NOK starts to fill the gap by rising above $4.10, it has ample room to run before any ceilings come into play. This suggests some quick gains could be in store if buyers press their bets at this point.

NOK’s volume patterns have turned bullish in recent weeks, with accumulation days multiplying. These high volume rallies suggest institutions are wading into the waters and could continue to support NOK stock’s recovery bid. The 20-day moving average and even the 50-day moving average are rotating higher, confirming buyers’ newfound control of the short-term and intermediate-term trends.

Finally, the RSI of Nokia stock just rallied to its highest level since last July, suggesting that we’re seeing more upside momentum than at any time over the past six months.

The Trade

We could consider trading options, but why bother? Nokia stock is cheap enough to make it similar to an option, so the complexity of using derivatives is unnecessary.

Buy NOK stock if it pushes above its gap resistance at $4.10. A push towards the 200-day moving average near $4.77 is the ultimate target, but I would take partial profits along the way in case the stock lacks the mustard to fill the entire gap.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.

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