DirecTV Group (NASDAQ:DTV) gapped higher and broke out after AT&T approached the satellite TV content provider about an acquisition.  The move generated a runaway gap, while the MACD generated buy signal.

Acquisition

AT&T has reportedly approached DirecTV about buying the satellite-TV provider in a deal that could be worth at least $40 billion. DirecTV, whose market cap is $39.5 billion, is open to a deal. The combined company would have almost 26 million pay-TV subscribers’ vs the 30 million that Comcast would have if it acquires Time Warner Cable. As with the Comcast-TWC deal, a major question is whether regulators would authorize a tie-up between AT&T and DirecTV.

Momentum on DirecTV Stock

Momentum on DTV has turned positive as the MACD (moving average convergence divergence) index generated a buy signal.  This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.

The MACD index moved from negative territory to positive territory confirming the bullish MACD buy signal.

The relative strength index (RSI), which is an oscillator that measures overbought and oversold level, is printing a reading near 66, which is just below the overbought trigger level of 70.  During the last surge in the stock price, the RSI peaked at 90, which give investors an idea of how far this stock can run. 

directv-stock

Break Away Gaps

DTV broke out, gapping above trend line resistance near $80.5, on strong volume.  A breakaway gap occurs when the price of a stock is breaking out of a consolidation trading range or congestion area. A congestion area is just a price range in which the market has traded for some period. DTV had been trading in a $72.00 – $80.50 range since mid-February.

Volume will generally pick up significantly when a breakaway gap occurs. Most investors did not a deal by AT&T.  The breakaway gap has caught many investors on the wrong side of the trade, and those investors are now scrambling to cover their short positions.

Support and Resistance for DirecTV Stock

DTV broke out above horizontal trend line resistance near $80.50, making a new all-time high, and is poised to move higher.  Support is seen near former resistance at $80.50

The weekly DirecTV stock chart shows that the stock has broken out above a consolidation range that was capped by a horizontal trend line near 80.50.  Weekly support is seen near the recent lows at $73. Momentum is positive with the weekly MACD printing a reading in positive territory with an upward sloping trajectory that points to higher prices. The MACD also generated a weekly buy signal.

One caveat it that the weekly RSI, (relative strength index) which is an oscillator that measures overbought and oversold level is printing near 68, which is just below the overbought trigger level of 70.

directv-stock-chart

Trading DirecTV Stock

Investors looking to take advantage of the positive momentum in DTV could purchase the stock near the break out level, at former resistance at $80.50.

Investors could consider taking profits near $93, which is estimated by a channel high that extents at $13 dollars per year. That would translate into a profit of 15%.  A close below the recent lows near $73 would prudent place to stop out.

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Published by Wyatt Investment Research at