Nokia potentially oversold on the alcatel lucent news
Fundamentals:
Nokia took a big hit after stating that they are starting an internal investigation on alcatel lucent which they have bought. Investors reacted pretty hard to this and the stock was diving more that -8% during that day. It of course could be that there will be some negative facts to be found and in the worst case even some fines to be had. So there is of course a risk associated with longing the stock at this point.
However, let's consider this from a different perspective. The company decided willingly to start investigation and they contacted officials by themselves and they do not expect any concrete consequences on the company itself based on the investigation results. Of course this is their own statement and view on the matter and they would ideally always want to make it look like a minor thing even if it weren't. However, considering the other possibility that there won't be anything significant to be found on the investigations and there won't be any fines. The stock has dived more that -5% based on these news and the fear of the potential results. If nothing will be found this would suggest the stock was significantly oversold and should be looking to recover.
Techical side:
The technical side is quite simplistic. RSI9 shows that the stock is on the edge of being oversold and looking at the previous behavior the level 30 has often provided support and the price has bounced up. Sometimes of course this has been violated and can be the case here as well. However just considering the option that after the stock has been up and being valuated at the previous levels 5.25 - 5.6 after Q4 report it would be quite hard to believe the proper value would be below 5€ which is of course a very important support level.
Considering the both sides on this price crash I would suggest that Nokia is currently oversold and will be recovering when the investigations continue and if they show no concrete results suggesting significant fines to be had. I'd be looking to long Nokia now or at the fibonacci support at 5.065 which has been already tested briefly once. Stop loss should be placed below 5.065 support or 5.00 depending on your risk tolerance and personal view on how confident you are on these news.
Lastly considering the option that the investigations bring up skeletons in the closet and significant fines are had then the stop loss is still quite small and the potential reward in my opinion clearly out weights the risk.
Nokia took a big hit after stating that they are starting an internal investigation on alcatel lucent which they have bought. Investors reacted pretty hard to this and the stock was diving more that -8% during that day. It of course could be that there will be some negative facts to be found and in the worst case even some fines to be had. So there is of course a risk associated with longing the stock at this point.
However, let's consider this from a different perspective. The company decided willingly to start investigation and they contacted officials by themselves and they do not expect any concrete consequences on the company itself based on the investigation results. Of course this is their own statement and view on the matter and they would ideally always want to make it look like a minor thing even if it weren't. However, considering the other possibility that there won't be anything significant to be found on the investigations and there won't be any fines. The stock has dived more that -5% based on these news and the fear of the potential results. If nothing will be found this would suggest the stock was significantly oversold and should be looking to recover.
Techical side:
The technical side is quite simplistic. RSI9 shows that the stock is on the edge of being oversold and looking at the previous behavior the level 30 has often provided support and the price has bounced up. Sometimes of course this has been violated and can be the case here as well. However just considering the option that after the stock has been up and being valuated at the previous levels 5.25 - 5.6 after Q4 report it would be quite hard to believe the proper value would be below 5€ which is of course a very important support level.
Considering the both sides on this price crash I would suggest that Nokia is currently oversold and will be recovering when the investigations continue and if they show no concrete results suggesting significant fines to be had. I'd be looking to long Nokia now or at the fibonacci support at 5.065 which has been already tested briefly once. Stop loss should be placed below 5.065 support or 5.00 depending on your risk tolerance and personal view on how confident you are on these news.
Lastly considering the option that the investigations bring up skeletons in the closet and significant fines are had then the stop loss is still quite small and the potential reward in my opinion clearly out weights the risk.
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