Eastman Kodak stock price surged: is this fallen angel a good buy?

Eastman Kodak (NYSE: KODK) stock price formed a god candle on Thursday, making it one of the best-performing companies in Wall Street. It jumped by more than 52%, its highest point since July 23rd. It has soared by more than 60% from its lowest level this year, giving it a market cap of more than $278 million. 

Why KODK shares surged

Eastman Kodak share price surged hard on Thursday after an important report by Bloomberg. The report said that the company was disbanding a team that manages its pension investments worth over $4 billion. 

The company’s pension fund has been overfunded from about $100 million in 2019 to $1.2 billion. This performance was because of the fund’s outperformance and higher interest rates, which pushed down the value of its liabilities. 

The report came a few days before the company is scheduled to publish its quarterly results, which will provide more colour about its performance. 

In November, the company published results that were relatively mixed. Its total revenue for the nine months of the year came in at $842 million, down from the previous year’s $842 million. Its net income came in at $70 million. Excluding other external factors, its net income stood at $87 million.

Further, the company had a strong balance sheet with over $246 million in cash and short-term investments. The company has also repaid substantial amounts of loans. For example, it had an early extinguishment of debt of about $27 million in the last quarter. 

For starters, Eastman Kodak was once the biggest camera company in the world. In the past decade, however, its camera business has been disrupted by smartphones and drones, which can capture even better photos.

As a result, the company now focuses on making advanced materials and chemicals that are used in industrial film and chemicals, motion picture, and functional printing. Most of its revenue comes from Kodak Alaris.

Eastman Kodak stock price forecast

KODK chart by TradingView

Turning to the daily chart, we see that the KODK share price went parabolic on Thursday after the pension announcement. Before the rebound, the stock was trading at $3.50. It had bottomed at $3.30, where it struggled moving below a few times. 

A closer look shows that the stock formed a double-bottom pattern, which is one of the most popular bullish signs. As it went parabolic, the stock moved above the neckline of the double-top pattern at $4.53. 

The stock has jumped above the 50-day and 100-day moving averages. Also, the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have pointed upwards.

Therefore, there are three potential next moves to expect. First, the stock could consolidate and form a bullish flag or pennant pattern. In most periods, these patterns are some of the best signs of a bullish continuation.

Second, the stock could retreat and retest the support at $4.53 as it moves into profit-taking. Third, it may continue with the uptrend as buyers target the key resistance at $6.33, its highest point on July 12th.