Nokia - a sleeping giant?Nokia has been quiet for years - too quiet I suspect. You remember those old brick phones, the ones that were nearly indestructible, right?
I have been watching Nokia off and on since March of last year, trying to find a decent entry point. This is an update to my original idea linked below.
Due to Nokia's prior reputation, I have for nearly a year had a very strong hunch that it is soon to have a major break upwards.
On Robinhood, there is a $7 call leap contract that expires 1/21/2022. It is currently trading for 16 cents.
Around the end of October, the leap contract hit a low of 12 cents then had a fairly impressive rebound to higher than 21 cents.
Currently, I am holding the largest position I have ever had in stocks. Specifically on Nokia, after I saw that it bottomed yet again at 12 cents.
A lot of people would say going all in on one position is not smart, but I'm not a person that can pay attention to too many things/assets at once.
Plus, the feeling I have about this stock is next to unbreakable, no matter what it does in the short term.
Fundamentals aside, this is a chart analysis of why I believe Nokia is not just 'a' sleeping giant, but 'the' sleeping giant.
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This is a trend line in Nokia that I spotted which began on the week of February 20th, 2001.
Nokia broke below this trend line with force between the weeks of April 19th, 2010, and April 26th, 2010.
Since then, Nokia has failed to break above it for any significant amount of time until the week of May 22nd, 2017.
Unfortunately Nokia was unable to hold mid-term support and on the week of October 23rd, 2017, had a significant ~20% drop.
Nokia has battled with breaking and staying above this trend line since then, with every break below causing significant selling pressure.
Interestingly, Nokia has an earnings report coming up on February 4th, 2021. Almost 20 years to the day that this trend began.
I believe Nokia is fairly close to breaking above this trend line for good due to a few things I am seeing on the chart.
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When I check the RSI, I immediately notice multiple trends. The first one being Nokia significantly rejecting any value above 60.
From the week of January 21st, 2014 to April 17th, 2017, Nokia did not stay above 60 RSI. Even the April 2017 break above was short lived.
Also notice, that break above 60 RSI was likely caused by Nokia testing support at first the .618 Fib, then the .50 Fib.
It then proceeded to have a longer-term triple top in price at the $6.4 resistance while the RSI was printing noticeably lower highs.
The failure in 2019 to break above this resistance then began another major downtrend.
This is the second trend I spotted in the RSI. This is also the second biggest justification I have for being so bullish on Nokia.
Since entering overbought in late 2013, Nokia has failed at breaking above 60 RSI let alone 70 until the end of May, 2017.
The May high in the RSI created a few different trend lines that Nokia has reacted very strongly to.
Up until April 2020, the longest amount of time that Nokia's RSI has been able to spend above this resistance is approximately 2 months.
On the week of April 20th, 2020, Nokia was able to break above this trend with force, and after 2 successful support tests has so far stayed above it.
A much smaller and shorter-term trend line I noticed. Currently, Nokia is above it.
When we go into the 3d chart, we can see that this trend line was rejected as resistance on October 19th after falling below it in late August.
In late November, the RSI once again managed to break back above it. It successfully passed a support test and is currently attempting to test it once more to flip it from resistance into support.
When we check the daily, however, there is something interesting to be seen. After briefly dipping below this trend line, the RSI had a decent rally back above it. We can see that this is the 3rd attempt to test for support. Should the next 3 day candle hold, this should cause another test of local resistance.
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And now, the MACD. The MACD has, in my opinion, been showing consistency over the past 10 years with a trend line of higher lows.
With the exception of the drop from Covid, the major lows in the MACD have all been higher than the last.
Even when the Covid drop happened, the MACD printed bullish divergence. The MACD histogram at the same time printed hidden bullish divergence.
This caused Nokia to have a ~119% rally.
We can also see that, currently, the MACD is above the higher lows trend line.
Zooming out to the 1 month time frame, an interesting situation.
After testing and rejecting the 0 line, the MACD printed what is so far a potential double bottom. A break above the 0 line will validate this scenario.
There is also a slight bullish cross. The histogram has also flipped upwards, but not by a significant margin.
The 2 month shows a few other interesting signals.
The thing that catches my eye here is what seems to be very strong bullish divergence. The September 2020 price low is approximately 28% lower than the September 2016 low, yet the MACD is showing a higher low. Nokia is also attempting a bullish cross here after being rejected on the first attempt.
Another key thing to note on this time frame in the MACD is the histogram, which appears to be showing sell momentum waning.
Nokia attempted a bullish cross in the July 2020 2 month candle but was rejected, and is now yet again attempting another bullish cross.
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Aisde from Nokia currently residing above the 20 year trend line, there are also multiple price patterns/signals presenting themselves.
After Nokia dropped from the .5 Fib retracement, the price has been printing a potential bear flag.
Nokia did however catch strong buying support on the 0.886 Fib, which is typically the absolute last stand for bulls to regain control.
That Fib also coincided with the Covid market-wide selloff in March of 2020.
After Nokia broke back above the 20 year trend line, it was also able to break a mid-term diagonal resistance. This resistance has been tested successfully for sure once, although most people would argue the gap was also potentially indicative of a successful support test.
Within this bear flag, however, there are 3 different price structures indicating potential bullish pressure building. I do not hold much weight with price patterns anymore however as I have been burned one too many times by them, and/or fake breaks of them. Still, I find that for analytical purposes I may as well mention them just in case.
First, a giant potential inverted head and shoulders pattern. Should this complete, the measured target for this would be approximately $2 higher than the point where it breaks above the neckline. Technically, this pattern alone could quite easily propel Nokia above my forecasted target of $7 depending on if the neckline is tilted upwards or is the 0.618 Fib. And again, only if the pattern is legit.
Second, a much smaller potential inverted head and shoulders pattern. Should this one complete, the measured target for it is approximately $1 higher than the point of breakout above the neckline. The measured target for this particular one to complete would be roughly the 0.5 Fib, which resides at $5.18.
Interestingly, both of these POTENTIAL inverted head and shoulders pattern started at the 0.618 Fib.
The bigger one completing would propel Nokia out of the current bear flag which would be a major buy signal to traders.
There is also a potential ascending triangle, with an apex around August 2021.
A long term downtrend channel.
A long term potential falling wedge with fake breakouts to the upside and downside.
I think this is more likely to be a downtrend channel than anything but I guess you never know.
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In conclusion, Nokia at this point can go pretty much anywhere. What I have outlined in this idea is strongly bias to the bullish side.
The fundamentals for Nokia are currently very neutral. There is a new CEO who previously worked for Sony Ericsson, who has outlined a new roadmap for the company as a whole. They have positive cash flow and a low debt to asset ratio. They did however have a drop in overall revenue. Also, the outstanding amount of shares for Nokia is very high. Due to this, a lot of traders believe it would take a seriously large catalyst for Nokia to break its current downtrend/range. I may be early on this trade, but I do believe that within the next 6 months, Nokia could make a serious turnaround.
At this point, I believe that anything below current share price is a strong buy.
The leap contracts for Nokia are also dirt cheap, according to multiple postings on social media.
Time will tell. I will leave you with this food for thought:
When in doubt.. Zoom out.
Original idea:
