Ericsson (ADR) (NASDAQ:ERIC) opened sharply lower yesterday and despite some intraday recovery, ended the session with a big loss of 8.82% even after the company announced an increase of 13% in sales in the last quarter, with the volatility and the significant moves in foreign exchanges affecting the sales in a positive manner, coupled with a strong quarter of Professional Services too. The segment Networks saw a decline though the segment Global Services improved business.
Possibly the Ericsson (ADR) (NASDAQ:ERIC) investors are a bit worried about the outcome of the investigation The United States International Trade Commission (ITC) is conducting against Apple Inc. (NASDAQ:AAPL) following the complaint registered by ERIC for violating its patents.
Technically the stock lies in quite a weak state. The last rally from the November 2014 bottom took the form of a Rising Wedge, clearly a pattern not with a lot of bullish implications. The pattern actually implies the bulls getting out of steam even when they manage to keep the trend up. The sharp gap down price action yesterday just triggered the pattern on the downside and that gap may not be filled up anytime soon. The pattern target of $11.20 has been met in a single session and now the price action today will determine the next course of direction the stock is going to take in the next few weeks.
The long term chart clearly shows that $11.20 is also the lower boundary of the range the stock is stuck in for more than a year. The range of $11.00-$13.50 may further limit any more extension if the bears fail to manage it on the downside right now. The intraday recovery yesterday helped the stock to close above another important support level of $11.50, suggesting that breaking the range may not be that easy.
