NCR Corp. (NCR), formerly National Cash Register, has had a rough two months as it tumbled from a 52-week high of $41.63 in early October to a low of $31.38 last week. But from bearish trends can come great buying opportunities, and that seems to be the case here.
From the look of its chart, this provider of kiosks, ATMs and point of sale technology is in the sweet spot of changing its trend from bearish to bullish.
The chart shows that at its low NCR retraced a Fibonacci 38.2% of its rally from the important December 2011 low (not shown). That is when the bull market trend kicked it up a notch with accelerated gains.
Further, there is more traditional support at that level from the small price dip in June.
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Now that we have the price framework, let's look at why this is a buy point and not just a speed bump in a decline. For that, we turn to Bollinger Bands.
These Bands are similar to other types of trading bands, but they use volatility to set their width. The real difference is that touching one of the Bands is not necessarily a sign of pending reversal.
What is, however, is a condition when prices set a low below the lower Band in a downtrend, and then set a lower low but back within the Bands. I call it divergence, but you may hear different terms.
The point is that downside momentum is waning and the odds for an upside reversal are high. Add the framework of support, and all we need is a trigger.
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That trigger came on Dec. 12 when the stock set a lower low and then reversed to the upside intraday. Candlestick analysts call that a hammer, and it is a bullish signal if confirmed with a move above that day's high, which has occurred.
Momentum analysts will note an upside crossover in Moving Average Convergence/Divergence (MACD) to add to the bullish case.
All told, we see a nice technical setup for NCR.
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Recommended Trade Setup:
-- Buy NCR at the market price
-- Set stop-loss at $31
-- Set initial price target at $37 for a potential 13% gain in eight weeks