UTStarcom (UTSI)

Company

"UTStarcom is a global leader in the manufacture, integration and support of IP-based, end-to-end networking and telecommunications solutions. The company sells converged broadband wireless and wireline products, an integrated IPTV solution, and a comprehensive line of handset and customer premise equipment to operators in both emerging and established telecommunications markets worldwide." (company website)

Buy

29-Nov-05. UTSI has been bouncing along in the doldrums for several months (see sidebar), but now appears to have started an uptrend.

• Price momentum (PPO) — gathering strength over past month
• Trend (ADX) — strengthening for past two weeks
• Money flow (CMF) — has gone to strongly positive over past month
• Relative strength (RSI) — sharply stronger over past month
• Volume — heavily traded, nice volume on up-days

Sell

23-Jan-06. UTSI has presented a generally gloomy looking chart practically from the day I bought it: price momentum (PPO) has slowed; trend strength (ADX) has weakened; relative strength (RSI) has weakened; and it has been oversold (StochRSI) for at least a month.

There was, however, a glimmer of hope in the chart: money flow (CMF) had started to become more positive after the new year, and UTSI was trading above the 50-day moving average. It was, in fact, squeezed between the falling 200-day average above and the rising 50-day average below. As those two averages came together it was entirely plausible that UTSI would break through resistance (the 200-day average) and resume moving upward. As recently as one week ago, Market Edge had UTSI as a buy.

Unfortunately, today's continued fall indicates — to me at least — that UTSI is apparently going to follow the 200-day average down instead of following the 50-day average up. Bye-bye!