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Corning (NYSE: GLW) has two brutal years of price action behind it. However, after forming a double-bottom during the second half of 2012, it has made a respectable series of higher lows that should be of concern to anyone short the stock.
This constructive price action in recent months has pushed GLW to a critical resistance area in multiple time frames. And a move above that level could lead to a great bull run in the stock.
To gain perspective of where the stock currently sits, we must go back in time somewhat further than usual. After becoming a cult stock of sorts, GLW staged a vertical move in the year 2000, but later that year dropped equally quickly and ultimately didn't find a bottom until the autumn of 2002.
While the going has been tough ever since for Corning stock, through a bigger picture lens it shouldn't be too hard to see the development of a narrowing trading range and a series of higher lows off the 2002 bottom.
During the past eight months or so, the stock has been bumping along the lower end of the trading range, and as we will see on the nearer-term charts, developing some promising technical patterns.
Moving on to the daily chart below, we are able to evaluate the recent price action in more detail.
After struggling, and quite frankly not really respecting its 200-day simple moving average (blue line), for the past 12 months, the stock once again pushed above it in early February, retested it a few weeks later, and finally resolved to the upside. This most recent rally has brought the stock into a key area of resistance that dates back to late 2011.
Given the constructive price action off the November bottom, it now looks like the stock should have enough momentum to break past this line.
The next chart is a close-up of Corning stock, and it further highlights the recent constructive price action and current toggle point the stock finds itself at. As mentioned above, GLW formed a double-bottom last year with the lows in August and November.
From there, after gapping higher in late November, GLW began its process of making higher lows versus its bottom. The first higher low came in early February, and happened to coincide with the 50% retracement of the rally from the November lows up to the December highs. For those familiar with my work, I often find price targets using Fibonacci extension measurements. In this case, the February retracement gives us a price target in the high $13s.
The promising price action off the November lows has also formed a simple lateral resistance zone near $13.10, which was briefly broken last week, only for the stock to close below it again on a weekly basis. A second attempt to break past this line of resistance should also push the stock past the downward sloping resistance line from the medium-term chart above and set the stock up for a continued push higher.
Recommended Trade Setup:
-- Buy GLW at the market price-- Set stop-loss at $12.60-- Set initial price target at $13.90 for a potential 7% gain-- Set secondary price target at $14.50 for a potential 12% gain-- Time frame: 4-8 weeks
As a die-hard value investor, I struggled with its valuation in the past, but now I'm ready to pull the trigger.
Following a breakdown, there are simply too many bearish technicals on its chart to ignore.
As bearish trends take hold, this pick has become an overpriced company in a struggling sector.