Shares of OSI Systems Inc (OSIS) shot up 21 percent on Friday to their highest level since May 17, after the company said it reached a settlement with the Department of Homeland Security over issues with its Rapiscan passenger scanning product and its software. The deal will allow the Hawthorne, California – based firm to continue its current and future business with U.S. federal government agencies.
OSI Systems’ stock got an immediate boost on the news, spiking to $64 and trading as high as $67.50. The ticker came off of its intraday high to close at $63.50, up $7.65, or 13.69%, on strong volume (nearly 1.5 million shares).
Looking at OSIS 1-year chart price-pattern, it can be said the ticker has been facing volatility and technical weakness for quite some time now. The stock of the electronic systems designer that recently broke through a new 52-week low, is up only 3.45% year-to-date, trailing the broader S&P 500 Index (SPX) by roughly 18 percentage points. But while this activity could be indicative of the name struggling technically — shares have changed hands between $48.10/Apr 24, 2013, and $81.23/Oct 26, 2012 in the past 52-weeks — it’s also true the security has been exhibiting some rangebound tendencies. Since late April, OSIS has not fallen below its previous low. In fact, it has been making higher-lows, which is suggestive of the stock trying to consolidate at current levels, as well as a confirmation that with the stock breaking out to a 1-month high, the trend has changed.
If this upper range continues to be in play, momentum traders could take the name to re-test or possibly take out its next major overhead resistance located at the $66.34 and $71.36 levels, respectively. Having said this, it is prudent to note that after the recent spike, the ticker has entered into the overbought territory. The RSI with a reading value of over 63 signifies that overbought position.
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