Time to stock up at Warehouse?

CARPHONE Warehouse posted slightly better than anticipated results last week, producing volatile trading conditions.

Traders focused on the company's new marketing initiative, offering fixed landline users free calls between fellow customers. This is the type of aggressive account acquisition strategy that has worked for the communication specialist in the past. But in terms of technical analysis, what is the outlook for this mid-cap stock?

Just 12 months ago Carphone shares stood at below 50p. Investors have seen a sensational rise, to a high point of 159p in January this year. Since then the stock has come under some selling pressure trading briefly below 130p. This downtrend has formed a 'triangle' pattern, predicting that a move was imminent. The break was to the upside on March 26th as shares rallied through short-term resistance trading up to 145p.

So what now? Well, the results on Thursday had a mixed reception, reflected with a fairly large trading range from 141p to 152p on the day. Technically, the trend is upward as long as shares hold above 138p. This should allow further strength to push values as high as 166p - a near 20% premium on the current price - over the next few weeks.

On the downside, lack of investor support at current levels could lead to a close below the 138p level, re-establishing downward momentum targeting 127p.

Technically the picture is bullish, but either way, the next few days of trading should set the trend for the coming months.

Stockwatch is written by William Akerman of Quantigma. For more views on techical analysis, go to www.quantigma.com