ARRIS Group, Inc. (NASDAQ:ARRS), the broadband equipment specialist, exploded on the upside yesterday and managed to protect almost all the gains by the closing to end the session 22% up. The volume surged to 18 million against a daily average of 2 million only after the company announced a deal to buy Pace plc (LON:PIC) for an aggregate stock and cash consideration of $2.1 billion. The acquisition, to be completed by 2015 end, will result in a reduction of the adjusted tax rate of ARRS to 26-28% and other significant operational synergies.
The huge jump yesterday has taken ARRIS Group, Inc. (NASDAQ:ARRS) to a very interesting technical point. Most of the last 12 months were spent in a sideways manner and the maximum depth of that range, roughly $7, was established in the period of October-November 2014, considering the low of $23.71 and the high of $30.90. Adding that $7 to the breakout level of $31 gives us a target of $38, only 70 cents away from the last closing price.
Now a single glance at the long term chart suffices to show the 2000 top at $61 and the 2002 bottom of $1.50, the highest and lowest point for the stock in the last 20 years. The Golden Ratio or 61.8% retracement level of this range comes at $38.40, coinciding with the short term target of $38 very nicely. Then there is the long term channel, shown on the chart attached. So all these three different perspectives give us a confluence area around $38 and such a confluence can never be ignored. If the stock manages to break and sustain above the upper boundary of the channel, especially $38-$39, then more upside towards $50 can’t be ruled out but for now, the investors may keep an eye for any sharp bout of profit booking.
