Is Sprint Ready to Run?

Shares of Sprint Nextel (NYSE: S) have been rolling lower since spiking higher in June 2011. While shares touched $6.45 that day, they were quickly sold lower and have been trending as such ever since.

Sprint Nextel did manage to make a very high volume bottom on October 10th, 2011, touching $2.10; they have been trading in a sweeping consolidating pattern ever since. Notably, within the past two months Sprint has tested and held the $2.15 on two occasions, sparking the idea that shares are at a multi-year bottom.

With the dilution from its LTE built out now resolved, as well as it ‘situation' with Clearwire (NASDAQ: CLWR), if seems that the major negative catalysts are behind the name.

With the 20-day and 50-day moving averages both beginning to flatten out, this may be a good time to start building a long-term long stock position in the name. The risk/reward is clearly there and the trade is simple: buy shares here, place a stop around $2.13, and add shares on a break above the 50-day moving average.

While upside is likely capped at the 200-day moving average (~$3.75) that would be a 62% return.

For those that prefer options, the Jan2014 $2/2 risk reversal @ $0.45 would get you there. With that said, I do prefer straight shares here. For those worried about overall dollar amount risk, consider selling the Jan2014 $3.00 call against your long position for $0.53-0.56.

Sprint Nextel Corporation is a holding company, with its operations primarily conducted by its subsidiaries. Sprint is a communications company offering a range of wireless and wireline communications products and services for individual consumers, businesses, government subscribers and resellers.