Can Sprint Nextel Extend Its Rally?

With shares of Sprint Nextel (NYSE:S) trading around $6, is S an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Sprint Nextel offers a range of wireless and wireline communications products and services to individual consumers, businesses, government subscribers, and resellers in the United States, Puerto Rico, and the U.S. Virgin Islands. The company’s wireless segment provides local and long distance wireless voice services, internet access, asset and fleet management, dispatch services, navigation tools, and mobile entertainment applications. The wireline segment offers wireline voice and data communication. As consumers become increasingly more connected, Sprint Nextel is poised to capitalize on this powerful trend through its products and services.

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T = Technicals on the Stock Chart are Strong

Sprint Nextel has seen a long-term downtrend since reaching highs during the technology bubble. Currently, the stock has gained some ground and its attempting to reverse this long-term downtrend. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sprint Nextel is trading above its risking key averages which signal bullish price action in the near-term.

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S

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Sprint Nextel options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Sprint Nextel Options

28.25%

6%

10%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

April Options

Average

Average

May Options

Average

Average

As of today, there is an average demand from call buyers or sellers and average demand by put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

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