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).