Xerox Corporation shares rose over half of a percent on Friday in a move that will test key trendline resistance levels this week. A breakout from trendline resistance could send shares to fresh 52-week highs following their rally over the past two months. While the company has been struggling in terms of its fundamental performance, investors are hoping that Xerox’s plans to shed non-core assets and modernize its existing businesses will pay off in the long term.
Last quarter, the company reported revenue that fell nearly 8% to $2.57 billion – missing consensus estimates by $40 million – while earnings per share of 87 cents beat consensus estimates by seven cents per share. Equipment sales fell by 16% to $546 million, while post-sale revenue slipped 5.7% to $2.02 billion. On the positive side, adjusted gross margins improved 50 basis points to 40.7% thanks to reduced expenses. (See also: Xerox Beats on Q2 Earnings but Misses on Revenue.)
From a technical standpoint, Xerox stock broke through R1 resistance at $31.87 to upper trendline resistance at around $32.30. The relative strength index (RSI) is approaching overbought levels at 61.21, while the moving average convergence divergence (MACD) remains in a bearish downtrend since mid-August. Traders should maintain a bullish bias on the stock given its significant run-up of approximately 15% over the past three months.
Traders should watch for a breakout from upper trendline resistance to R2 resistance at $33.07, which could lead to a breakout to new 52-week highs. If the stock fails to break out, prices could move down to R1 support at $31.87. A further breakdown from these levels could lead the stock to retest lower trendline support at $31.00. Traders should maintain a bullish bias on the stock while watching RSI levels for overbought conditions. (For more, see: Xerox Strengthens Foothold in Multi-Brand Retail Space.)
Xerox shares moved to test key resistance levels, which will have traders closely watching the stock this week.
Read more here: Xerox Stock Tests Resistance Amid 2-Month Rally