In our September 4th report, we had forecast a downtrend in the stock of consumer electronics and information technology provider Nokia Corp (NYSE: NOK). The assessment was made on the basis of poor performance of Ultraband and IP Networks and applications segment in the second-quarter, and a weak outlook for FY17. We had also expressed our interest to trade the probable downtrend by investing in a low or below option. The stock, which was trading at ~$6.40 at that point in time, declined below $6 in a week and the option expired in the money. Now, we expect a short-term bullish reversal in the stock due to reasons given below.
Nokia announced that its subsidiary Nokia Solutions and Networks has received a contract from Chunghwa Telecom Co. Ltd – a Taiwanese telecom service provider – for 3G network quality maintenance. The value of the maintenance contract is estimated to be about TWD 1.75 billion.
Furthermore, Nokia has also entered into a collaboration with Chunghwa Telecom to introduce G.Fast, an ultra-broadband service, in Taiwan. The deal was signed after considering the surge in demand for 4K TV and HD video services. Presently, the service providers are under considerable pressure due to lack of adequate infrastructure to deliver such facilities. In this regard, Chunghwa Telecom has already started making huge investments in creating a fiber optic network in Taiwan.
Nokia also intends to set up an LTE Network in the 700 Mhz spectrum band for the Shanghai Oriental Pearl Group. The network would enable the district of Hongkou in Shanghai to offer several smart city services. An advanced wireless communications service based on FDD-LTE technology will also be set up by Nokia for applications related to public safety.
Nokia is also expanding its ultra-broadband product portfolio, which would facilitate operators to make a smooth transition to 5G. Furthermore, the products would enable operators to improve network performance and increase LTE coverage.
According to Navigant Research, which provides benchmarking services and market research for highly regulated industries, Nokia leads the strategy and execution of low power wide area (LPWA) network equipment providers. Navigant came to the conclusion after assessing 15 service providers in the electrical utility vertical.
LPWA technologies were mainly designed to implement the Internet of Things. As of date, there are numerous LPWA technologies available in the market. Nokia’s LPWA equipment supports multiple standards, thereby making it the best option for several requirements. Thus, analysts believe that Nokia will be able to establish itself as a successful player in the power utility space.
The stock has formed a double bottom pattern in the chart, as shown below. Furthermore, the stochastic RSI indicator is in the oversold region. Thus, we can expect a short-term uptrend in the stock.
A long position in the scrip can be opened by investing surplus funds in a call option offered by a binary broker. In a case we proceed with the trade, an expiry date close to September 26th would be chosen. Likewise, the investment would be made only when the stock of Nokia trades near $6 in the NYSE.