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Nextel Regression Channel

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Nextel (NASD:NXTL) missed earnings estimates by 5 cents, but because they didn't lower their guidance for the rest of the year, the stock is moving up. For illustrative purposes only, lets look at Nextel's 60-minute chart with and without a regression channel.

Nextel 60-Minute Chart Without Channel

We can see that Nextel has been in a nice up trend recently. The 50-pma has crossed above the 200-pma, and has done a nice job of supporting prices. In the last hour of trading yesterday, NXTL surged above a previous high on convincing volume. The trend continued in today's first hour of trading, but has since consolidated into a mini-pennant. Now that we have a pullback, we could consider entering a long position on a upside break of the pennant around $19.50, and place a stop just under the previous high around $18. Looks like a decent trade.

Nextel Chart with Regression Channel

When we place an upward regression channel on Nextel we get a slightly different picture. We can now see that the upper boundary of the channel was responsible for halting today's advance. Actually sellers were, but you get the point. Entering a long position now could see prices hug the upper end of the channel and inch its way up to $20 like they did back in early April. What's more likely to happen is NXTL falling back down to the 50-pma, and create a lower risk entry point. Regression channels just offer another tool to tell you where you are in the trading landscape.

Jeffrey Canavan
Assistant Analyst

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