Markets

This Chart Is Too Good To Ignore

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It seems like nostalgia looking at Nokia (NYSE: NOK ) with a favorable outlook. The company is currently known to domestic investors as an also-ran cell phone maker -- I am one of the rare few who own a Nokia smartphone and happen to like it very much -- even though it operates in network infrastructure and navigation software as well.

But there is more to the story than a false perception by the investing public.

The company has cleared most of its hurdles in its quest to buy rival Alcatel-Lucent (NYSE: ALU ), and according to some analysts, that would create quite a competitive company overseas.

From a technical perspective, NOK appears to be setting up for an upside move. While the long-term picture is still damaged, there is something intriguing in the short term that could provide a quick profit for traders.

NOK Stock

Specifically, the stock has carved out a bullish flag pattern just below a short-term trendline. Said another way, NOK seems to be resting before making its breakout attempt. Any fears and problems brought to light by the merger announcement have had several months to work themselves out, and that shows up on the chart.

The stock jumped when the deal was announced in April. However, within days, the bears took over with a vengeance, sending the stock gapping down and kicking off a new leg lower. Yet, even as shares fell it seemed demand did not waver, at least according to on-balance volume.

This indicator keeps a running tab of volume traded on up days minus volume on down days, and most of the time it tracks price action. When it diverges, as it has since late May in NOK, we get a clue that something is going on. In this case, on-balance volume stayed flat as prices fell, and that suggests demand did not falter.

Now that the stock has broken out from its flag pattern and trendline, we can turn a bullish feeling into bullish action. Given the turmoil in the broader stock market, we needed a compelling reason to buy this or any stock under such conditions -- and we now have it with NOK's breakout.

A quick scoot up to $7.42, where there is resistance from the top of the April gap, seems to be well in reach.

Note that the distance on the chart is not great, but since the stock has a low dollar price it would result in a high percentage return.

Recommended Trade Setup:

-- Buy NOK at the market price

-- Set stop-loss at $6.60

-- Set initial price target at $7.42 for a potential 9% gain in three weeks

Note: In less than three weeks' time , one Profitable Trading expert has made:

-- A 27.2% profit on Foot Locker (NYSE: FL )

-- A 35.9% profit on Kansas City Southern (NYSE: KSU )

-- A 40.5% profit on Dillard's Inc. (NYSE: DDS )

-- A 69% profit on Alibaba Group (NYSE: BABA )

-- A 90.5% profit on Valero Energy (NYSE: VLO )

To get his next trade, follow this link.

This article was originally published on ProfitableTrading.com: This Chart is Too Good to Ignore .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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