Nokia (NOK) has seen no shortage of attention from investors in 2014. This Finnish handset maker has been one of the most volatile high-volume names of the year thanks to speculation over this firm's future. But in the short-term at least, this stock looks toxic.
Nokia is forming a textbook head and shoulders pattern, a bearish reversal setup that indicates exhaustion among buyers. The head and shoulders is formed by two swing highs that top out at approximately the same level (the shoulders), separated by a higher high (the head). The sell signal came yesterday on a move through the neckline right at $7.50. If you haven't already, it makes sense to sell NOK here before it moves down to test its nearest support level at $6.70.
Momentum, measured by 14-day RSI, adds some extra confirmation to downside in NOK. Our momentum gauge broke its uptrend in the middle of the pattern, an indication that selling pressure is overwhelming buying pressure right now.