Christmas cracker for mmO2

SHAREHOLDERS in wireless group mmO2 must think that Christmas has come early this week as one piece of good news after another has propelled the price to highs not seen for over 18 months.

This has allowed the share price to break above the long-term technical trend, meaning that more gains for investors should follow.

First came the news that the mobile phone retailers expected this to be their best Christmas season for three years, as strong demand for phones with colour screens and cameras fuelled demand.

Then a report that mmO2 is a potential takeover target for Japan's mobile phones giant NTT DoCoMo, which despite being largely speculative, further underpinned the share price. And most recently broker Goldman Sachs raised its recommendation to 'in-line' from 'underperform', adding that the overall sector has seen improvement.

This recent good news has meant the shares have penetrated the long-term trend line, pushing through several levels of resistance.

Looking at mmO2 over the past two years, the shares first traded at tech-bubble highs of almost 95p. Any hope of cracking the £1 barrier quickly faded as investors were faced with losses of 60% in value within the following six months.

The low in June 2002 of 35p was the turning point as shares entered an upward trend, carrying the price back to the current 75p. Although the shares accelerated they have been trading below their upper resistance level.

At least that was the case until this week‘s round of good news. Now, with the extra impetuous provided by the positive reports, the shares have burst through this 18-month resistance line.

Technically the penetration of 72p to 74p indicates that more rises will follow. Added to this is the fact that many traders are currently short of shares at these levels, meaning that if they are forced to buy them back, mmO2 will experience a sharp upward squeeze.

A price target of 86p looks to be the next area of resistance. At that level, all eyes will be focused on all time highs of 95p and the psychological £1 target!

However, 72p to 75p is an important range and as such some initial retrenchment is likely, probably trading around current levels for a few more days. Consistent closes above the resistance line at 73p will confirm the upward break.

So in summary, MMO2 shares look good both from recent news releases and from a Technical Analysis viewpoint. Expect more gains to follow unless the price drops and closes below 72p in the coming week. In this negative scenario, sellers will force values back towards 68p.