Brightpoint Inc.: Opportunity To Buy?

02/27/06 11:23:12 AM

by Koos van der Merwe

Do you look at a weekly chart or a daily chart?

Security: CELL
Position: Accumulate

Brightpoint (CELL) is a leading provider of outsourced services in the global wireless telecommunications and data industry. Innovative services provided include contract manufacturing, customized packaging, prepaid and ecommerce solutions, inventory management, distribution, and other outsourced services.

Sounds good, especially if you believe that anything to do with the telecommunications industry is the wave of the future. Let us look at what a daily chart tells us (Figure 1).

FIGURE 1: BRIGHTPOINT INC., DAILY

Graphic provided by: AdvancedGET.

Advanced GET suggests that Brightpoint could correct in a wave 4 correction. The PTI is suggesting a 99% certainty that this will occur with a wave 5 upward to follow a target of 42.89. The relative strength index (RSI) is confirming weakness, but rather than a drop below the 30 level, the RSI is suggesting that it could turn bullish once it tests the support line as shown by the blue arrow.

So the daily chart is saying, "Watch me, and if my price tests the 25.22 level and the RSI gives a buy signal, then buy me, otherwise wait for the price to test the 22.58 level, as long as the RSI confirms the buy level."

FIGURE 2: BRIGHTPOINT INC., WEEKLY

Graphic provided by: AdvancedGET.

The weekly chart (Figure 2) shows how a cup and handle formation developed, suggesting a target of $22.50 (13.38 - 4.20 = 9.18 + 13.38 = 22.50) should the price break above the $13.38 level. The price exceeded this target in two weeks of incredible strength, suggesting that a correction is now due. This is confirmed by the RSI divergence signal given, which is where the price makes a higher high, not confirmed by the indicator, which makes a lower high. Of course, the question is whether the support line of the RSI suggests a turning point.

In any case, both the daily and weekly charts suggest that a correction is now due. When both charts move in the same direction, the investor should sit up and take notice and prepare a strategy. The two charts of Brightpoint Inc. represent an opportunity to buy the share at lower levels as identified by the chart.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address:	3256 West 24th Ave
	Vancouver, BC
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Brightpoint Inc.: Opportunity To Buy?

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