j2 Global Communication (JCOM) – Communications Giant Testing Resistance Level After Pullback

j2 Global Communications provides a variety of business-critical communications and messaging services through its global communications/telephony/messaging network. This sector (Services/Communications Services: SCS) has seen a steady flow of institutional money and this has been reflected in the nice run up in the JCOM stock that began in the beginning of July 2005. Solid company fundaments and a sector leader also prove to be attractive here.

This morning JCOM opened nearly 1.5% lower to 23.14. This is just above the support level outlined below and what I like to refer to as an "injection point". The injection point is the point where the stock price touches a critical support level. A stop loss is placed immediately and directly under this injection point because of the enormous selling pressure it would be needed to move the stock another percent or two lower. This of course creates a low risk (high reward) entry point, aka an injection point.

My hopes are to buy on this point and wait for a quick bounce back to the 50Day SMA. Looking at the Full STO and MACD you can see the stock is heavily oversold as of late thus setting up a good chance for a strong bounce. The only thing I would like to warn about here is to watch for "crawling along" or repeated bumping of minor or major trend lines. Be prepared to see such trend lines broken like this broken. This is a technical analysis rule! Notice the first three red arrows I have pointed out on the graph and how the bounce is very definitive. No crawling along or repeated bumping there. If the stock is once again to bounce here, then I would like to see it happen this week. If not, then my stop is set just below the indicated trend line. A breach of this line could send the stock tumbling to test the mid-February lows (19.93).

Investor Term of the Day: Net Earnings
Gross sales minus taxes, interest, depreciation, and other expenses. Net earnings are one of the most important measures of a company's performance, since the pursuit of earnings is the primary reason companies exist. Sometimes net earnings includes one-time and extraordinary items, and sometimes it does not. also called net earnings or net income or bottom line.

UPDATE - Aug. 15th, 2006
As mentioned above, I do not like to see a stock "bounce" along support lines. My stop is only 15 cents under the price that JCOM closed today. There was significant volume to the downside today and I will be surprised if JCOM manages to hold. The stock did not react (bounce) as expected and the market has given signs to me that the bearish sentiment here will continue. Please set your stop loss orders and look for other opportunities should JCOM fail to hold support here. The market as a whole had a failed rally today. I wait now to see if JCOM bounces tomorrow or else I will probably be stopped out very early in the day.

This is a good example of how I do not try to MAKE a trade work, but rather analyze the signals that market is giving me and make my decisions based on that. Do not try to force a trade to work, but rather cut your losses (only 1%-2%) and move on to find better opportunities. Half the battle is making money, the other half is not losing it.

On a side note, 22Dollars will be on vacation this week. We are headed to the City of Lights (Las Vegas) with some close friends to spend a week at the Mirage. We are looking forward to it and hopefully the casino is as generous to me as the market (but probably not ;-) Take care.

UPDATE - Aug. 20th, 2006
Well there is the bounce I was looking for :-) I recently returned home from Fabulous Las Vegas to a pleasant "surprise". Ok, so maybe it wasn't that much of a surprise to see JCOM bounce nicely here. My trip, for those of you interested, was great. It is tough not to have a good time in that city of lights and to come home and find that you just made back the money you lost there and then some is a good feeling too. I guess what I learned from this trip was that I am better off "gambling" on stocks over a little ball landing on red.