The Rise and Fall of Nokia NOK

Oct 30, 2008: 4:35 PM CST

Nokia (NOK) Weekly:

Nokia investors have experienced a very wild ride in a short period since the start of 2006.  From a low near $16, Nokia rose to $40 per share in two years (though not exceeding is 2000 split-adjusted $55 high) and then has spent the better part of 2008 in virtually total free-fall.

I did want to point out a larger “accumulation-distribution” pattern (or cycle) that was evident in the stock.

From 2001 (after the ‘dot com’ collapse) until 2007, Nokia traded with a range of $10 to $20 before breaking out above this range clearly in 2007.  This would be considered a period of quiet “Accumulation” by long-term investors in hopes of higher future prices – it could also be considered “Phase 1” (or even Elliott Waves 1 and perhaps 2).

After price breached the $20 level and began a near 45 degree ascent, we would call this the “Realization” (Phase II) period where everyone begins to ‘catch on’ that prices will continue to rise and funds begin to accumulate shares more aggressively (though volume was not significantly different during this period).  This could be also described as an Elliott Wave 3 impulse if you like).

Finally, price went “near vertical” in the October period of 2007 (after a slight pullback to the rising 20 week EMA – Elliott Wave 4?) which constituted the final Phase 3 of the Cycle which is known as the “Euphoria” phase, meaning everyone is clamoring over each other to acquire shares in Nokia and the price soars to unsustainable highs.  It is at this time that the professionals are starting to distribute shares to the mass public (Elliott Wave 5?).

Finally, price peaks above $40 intra-week and then begins a lengthy slide down to current lows of $14 per share.  I don’t so much label this Phase but it can be called the “Mark-Down” phase or “Distribution” phase or the like – now, investors are clamoring to rid themselves of shares of Nokia they had earlier purchased at much higher prices.

(Elliott Wave Bonus:

Corrective Wave A took price down from the $40 highs to $28 lows rather quickly, when many perhaps saw the drop as a chance to get back in – after all, we buy on pullbacks, right?

Wave B then formed as price surged (literally) from $28 to $36 before rolling over as “B” held its reputation as a “sucker wave” before falling back down into the final Wave C decline from $38 down to $28… and beyond.  It’s possible that a new 5-wave impulse down began and may be completing… or more likely we may be setting up corrective Wave 4).

For an additional bonus, let’s look at Nokia’s current daily chart, which offers perhaps a little bullish hope at these low prices.

Nokia (NOK) Daily:

A multi-swing positive divergence has taken price up to moving average resistance (similar to the broader markets) so let’s see if buyers can step up and burst through the $17 per share level and turn the tide of selling.

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