It's been a rough year for shareholders of Ericsson Telephone (ERIC) -- shares of the Swedish communications firm have fallen close to 30% in the last year as telecom stocks struggled to regain share of the increasingly concentrated communications equipment market. Again, even though Sweden isn't in the eurozone (its currency is the krona), massive corporate exposure to the euro and exchange mechanisms mean that Ericsson has the attributes we're looking for in these setups.
After ERIC's dramatic fall in the trailing 12 months, shares of the company have been stuck trading sideways in a consolidation channel. While that's been a frustrating scenario for Ericsson shareholders, it does provide traders with an actionable setup right now.
Currently, Ericsson is forming an if/then trade as it bounces in between horizontal resistance at $10.50 and horizontal support at $9. We're looking for a break outside that channel to provide a direction for ERIC's shares. Here's how it works: if ERIC breaks out above $10.50, then we've got a buy signal. Otherwise, if shares fall below $9 support, then ERIC becomes a short candidate.Until one of those two conditions get met, I'd recommend staying away from this stock. Ericsson showed up on a list of 6 Tech Stocks to Avoid in 2012.
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