WWM - Analytics

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    Today’s Trading Edge: Xerox shares rallied after announcing plans on splitting into two companies

    WWM_XRX_JAN_31_2016.jpg

    Xerox Corp. (XRX) shares rallied over 5% on Friday after the company reported fourth quarter earnings and announced its plans to separate into two public companies, following a completion of comprehensive structural review. The company reported fourth quarter net income of $0.32 a share, slightly higher than the analyst consensus of $0.29 a share. Revenue missed with $4.65 billion in sales, lower than the expected $4.73 billion. Guidance for 2016 also came in line with an EPS range of $1.00 to $1.20 per share, expectations were for $1.00/share. After the close, S&P cut Xerox’s rating one notch to BBB- from BBB.  

    Price action on the Xerox daily chart shows that Friday’s rally respected both the 50- and 100-day SMA(s). The bullish move may still have further momentum if we see price take out the psychological $10.00 handle. If we see a return of the bearish trend that was in place for all of 2015, we could see price find major support from the $8.00 region. It is around that area we could see price form a bullish ABCD pattern and find major Fibonacci support from the 78.6% Fibonacci level of the 2012 low to 2014 high move. 

    If the current rally continues, major resistance will come from the $10.60 to $11.50 area.    

    The Trade: Buy XRX at $9.50, with a stop loss at $8.50 and a take profit at $11.50.  The Risk/Reward Ratio is 1:2


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