By: AllPennyStocks.com News

Friday, November 30, 2012

A solid technical chart, whether in a firm uptrend ready to break through to new highs or positioned for a bounce off support can be a profitable trade. Betting on rumors also can reap great rewards when news hits the airwaves. A combination of the two is, of course, a clear winner. At AllPennyStocks.com, we use algorithms based on technical analysis and good-old-fashioned experience to find stocks ready to make a move as showcased in our daily technical penny stocks to watch and video charts. An example of a chart that was positioned for a bounce of the bottom this week was DragonWave Inc. (TSX:DWI) (Nasdaq:DRWI), a provider of packet microwave radio systems for mobile and access networks, that has seen its chart reach grossly-oversold levels in recent weeks. As the stock slid lower, the news was scant for the Ottawa-based company for two months aside from an earnings report that showed revenue surged in the second quarter of fiscal 2013, largely on the back of sales to Nokia Siemens Networks. Sales to that channel were $32.3 million of the $44.2 million total for the quarter, a figure that soared above the $13.6 million in the year prior quarter.

Traders jumped at the rising revenues, sending shares higher before dropping lower in subsequent weeks; setting-up the possibility of a technical bounce.

This week, DragonWave has released news that has the share price sizzling upward (again, the perfect storm for a stock play).

On Tuesday, the company said that it penned a new contract with WireIE, a Canadian wholesale network operator, worth about $1 million in the first year. A younger firm, WireIE is growing and has been deploying DragonWave equipment since inception, so the new pact bodes well for the future at DragonWave. Shares began their climb this week after this news, advancing more than 20 percent on Wednesday after hitting three-year lows at $1.70 the week prior.

Shares are back on the run again on Friday as DragonWave reported the closing of Nokia Siemens Networks’ microwave transport business in China. The deal was closed on June 1, but today’s news marked the meeting of all Chinese regulatory requirements. With the finalizing of the transaction, about 100 Nokia Siemens Networks employees are now transferred to DragonWave.

While today’s news – and Tuesday’s news for that matter – may not have been earth-shattering, it demonstrates the power of a technical chart being coupled with corporate developments and the rise in value that can follow.

Shares of DWI are ahead by about 18 percent at $2.44 as the week winds towards a close. Should profit-takers not hit the stock in the final hour of the day and the price hold steady, Canadian-listed shares of DragonWave will have risen nearly 40 percent this week. Importantly, the price per share has risen back above the 50 day simple moving average (at $2.18), generally regarded as a sign of bullishness. Technical traders will be looking to that area to hold as support should any retracement in the stock price follow to signal that DragonWave may have found a bottom and possibly be ready to uptrend again. Proper due diligence is, as always, encouraged.

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