Here’s your second chance for a fast growing telecom stock. (June 14, 2017)
Today I want to look at Sierra Wireless ( NASDAQ:SWIR ) and this is why: From a technical perspective you can see the breakout here, but then it is ultimately, I guess you could say failed. I don’t really look at it as having failed. I look at it as having established a new range as opposed to say, this one. It is almost like a Darvas Box kind of thing.
Lets look at this. First of all the company. What do they do? They are a Canadian company designing wireless and embedded modules, gateways, and routers. Said a different way, they are in the telecom business. I won’t say it is a new company, but it is certainly in kind of a new uptrend here. You can see how the stock has been consolidating for the past 6 months or so, 4.5 months, something like that. We are now ready to start attacking this next high. What I am looking at is this, the revenue growth and the earnings over the last two quarters have been really, really strong. Prior to that, not so much. In other words, this is almost kind of a turnaround story. And as often happens the stock will start showing the turnaround before the actual numbers come in.
Back here when the fourth quarter earnings were reported here is where the stock gapped up and then it stayed above that level. This is kind of ultimate support right here (I will just snap that line there). This is ultimate support right here. According to Investors Business Daily EPS Ranking they are in the top 99 percentile. I other words, their earnings growth, as you can imagine, is really, really strong. On the fourth quarter ending December 31st their earnings grew by almost 240 percent from the same quarter the prior year. Okay, well maybe that is a fluke. Not so much. Then this last quarter ended in March, their earnings grew over 200 percent from the same quarter the prior year. What I am saying is, this is definitely a turnaround story with the fundamentals in your favor.
What I would suggest doing is, consider buying this stock. Just start a little position, start a small position around here. If the stock happens to pullback a little bit more then that would be all the better. The point is, you don’t want to be buying this on the way down. I don’t average down. I will take an initial position. If I have a plan where, okay I am buying this but if the stock pulls back to 28.00 or 27.50 then I will buy ‘x’ number of more shares, or I will put ‘x’ amount of dollars to work. So it is a part of the plan that I might buy on a pullback.
Typically what I will do is, I will set an entry and then I will take a small position. And then I need the stock to show me that I am correct in my trading position, then I will add to it. So I will actually average up as opposed to average down, and then I can be raising my stops along the way. What I am basically doing is, I am adding to my profit potential, but I am not adding risk because I am using protective stops along the way. They kind of get ratcheted up along with the stock. Here, I think this is kind of giving you a good buying opportunity. Not to make money tomorrow or Friday, but just to get into the stock at a good price level and then look forward to earnings the first part of August. I think this stock has room to go, I want you to be there.