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Rise of the Wrecked Tech by Jim Cramer
Editor's Note: The following is from a March 24 RealMoney.com column.
Maybe we are in some sort of resurrection season. In the last few months we've seen some of the real wreckage of the late 2000 period come back to life, Lazarus-like, and become investible.
Now, on the eve of former
CEO Joe Nacchio's trial, in
the dawn of the end of
, it might be worth it to take stock of what's happening here. Can you really get a rally in Broadwing, Qwest,
if nothing's going right? Can those go up simply because they are done going down?
I believe there are a couple of reasons for the revival. First,
Ed Whitacre will buy anyone. He will, that's one constant in this business. He could buy Broadwing or Qwest or Level 3 tomorrow and none of us would be surprised. Given that the companies themselves have stopped deteriorating, I can't even admonish those who would speculate on such a move. Second, the refinancing cycle really worked. Broadwing took advantage of it, and RCN managed to fix its balance sheet, albeit the hard way, with a first-class wipeout of shareholders.
Now the consolidation is happening so aggressively that you realize it is the undertone of all that is good. I studied that Level 3 upgrade that boosted the stock to $4 from $3.50.There was nothing new there; it felt like one of those "I don't want to get left behind" upgrades. I believe the same thing might be happening in the suppliers:
Consolidation is a beautiful thing. It gives hope, it makes sense and it makes money. I'd buy any of the stocks mentioned in this column knowing that, in the end, each is either prey or hunter, and right now
Editor's Note: Cramer reiterated his upbeat assessment of Broadwing in the Lightning Round on Wednesday's night's Mad Money, but added these comments Thursday morning:
I still am bullish on the company, but I'm not happy about the way it treated existing retail shareholders. It took advantage of its price to do a
deal (the sale of 3 million shares) below the market that was a private affair, and I
that. We don't like that stuff. It isn't fair; management should have let everyone in.
Patience Has Its Rewards by Dan Fitzpatrick
I like Broadwing here, and the strong uptrend appears intact. Still, the stock has a beta of 6. This means that the stock rises or falls six times as much as the
. That's a lot of volatility. And with so much volatility, the odds favor a better entry at some point. Let's look at the weekly chart.
I've drawn zig-zag lines to highlight the major price movements since the stock broke out last year. Each uptrend only sustained itself for so long before pausing and even pulling back a bit. But each uptrend ran for a significant gain. The most recent leg began on a breakout above $10. The stock hit $15 last week. That's a 50% return in less than a month. The even figure of $15 is probably a magnet for lots of limit sell orders. This concentrated supply is likely the most logical place for the next pause in the uptrend. Here's the daily chart.
We see the dramatic increase in interest in Broadwing this past month. Volume has been persistently heavy, and the uptrend remains intact. Still, look closely at the resistance line at $15. Notice how the bulls continue to get all the stock they want at $15. The stock could fall back to close to $12.50 before it firms up. Be a bit patient with Broadwing and you'll probably be rewarded with a more favorable entry.
Nearing Resistance by Alan Farley
The following is an excerpt from a March 28
is an Internet infrastructure provider that's been on fire since the start of this year. Since I wrote about this company in
mid-January, it's doubled in price.
Unfortunately, the stock is nearing firm resistance above $16 and could start to pull back soon.
RealMoney.com contributor Dan Fitzpatrick is a freelance writer and trading consultant who trades for his own account. At time of publication, Fitzpatrick was long Broadwing, though positions may change at any time.
Alan Farley is a professional trader and a contributor to RealMoney. Alan is also the author of the book The Master Swing Trader and operates a Web site related to swing trading (HardRightEdge.com). He also produces a premium product for TheStreet.com called
The Daily Swing Trade.
At the time of publication, Cramer did not own any of the stocks mentioned, although holdings can change at any time. To see his personal portfolio in real time and find out what trades Cramer will make before he makes them, sign up for