XRX Stock: Repeat of the Past?
Xerox Corp (NYSE:XRX) stock is up 3.32% after the company announced its strategic plan. The company plans to lay off more workers after the company splits itself in half. The spin-off involves splitting up the printer-copier business segment from the contract services business segment. The new company being spun off will be called Conduent Inc.
In most cases, companies use spin-offs in order to streamline business segments.
XRX stock has not been the best-performing name, and management believes that a spin-off will allow the growing business segment to receive the valuation it deserves and, as a result, this should create shareholder wealth.
The XRX stock chart has been constructive and, as result, the bullish trend that began after the financial crisis has continued. The problem with this bullish trend is that the performance created from it has been poor when compared to other growth technology names and applicable benchmark indices.
The position at which XRX stock currently sits is suggesting that it is setting up to move. If a bullish run is set to develop, then the lagging performance that plagued the past could soon be erased.
The following Xerox stock chart illustrates the constructive bullish trend that has developed.
Chart courtesy of StockCharts.com
Since XRX shares bottomed after the financial crisis, a bullish trend has developed, and it is illustrated on the chart above using an uptrend line. This line is created by connecting the troughs on a price chart. An uptrend is defined by higher highs and higher lows. It can easily be identified as the price moves from the lower left to the upper right. There should be no mistaking an uptrend from a downtrend.
The stock chart above illustrates that XRX stock has spent the entire year trading just above this trend line, and has been testing it from above. Each and every time the price hit this trend line, bulls continued to step in to support the price. Xerox stock will remain in a bull market for as long as the price remains above this trend line.
If this trend line is ever broken to the downside, this would have tremendous bearish implications for Xerox stock. This would signal an end to the bull market that began after the financial crisis concluded, and would suggest that a new bear market has begun.
The indicator in the lower panel labeled as “MACD” has been effective at indicating when a trending move in Xerox stock is set to begin. Moving average convergence/divergence (MACD) is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish momentum signals.
Previous bullish MACD crosses have confirmed that a bullish price move was set to develop. In August 2009 and January 2013, this signal was effective in indicating that a bullish price move in XRX stock was on the horizon. In both cases highlighted above, Xerox stock doubled before the share prices finally peaked and a sell-off ensued.
The MACD signal is currently converging, and a bullish cross is possible in the coming weeks. If this signal is generated, I would be very bullish on XRX stock and I would be expecting a similar run that would match the performance of the two previous bullish signals.
Bottom Line on Xerox Stock
A lot of speculation has been swirling with regards to Xerox stock and the upcoming spin-off at year-end. The price action on XRX stock has remained constructive, and a bullish signal could develop in the coming weeks that would really pique my interests. This bullish signal is all I would need to hold a bullish view on Xerox stock.