Traditionally speaking, telecom companies made a buck by offering voice calling, text and internet via landline connection services. But now, the business is primarily driven by wireless, along with wired internet, data and business solutions.
As the industry welcomes growth opportunities presented by the internet of things, mobile payment and ever-evolving communications technologies, we’re likely to see momentum in the telecom sector continue … but that doesn’t mean that these non-traditional business models won’t also cause new challenges to crop up.
In the battle of the telecoms, everyone wins. At least, that’s what the charts suggest. And today, we’ll focus on three sector leaders here in the United States to determine what sentiment has looked like over the past year or so.
Telecom Stocks to Watch: AT&T (T)
Click to Enlarge AT&T Inc. (NYSE:T) is a feisty first on our list, putting up a fight by offering unlimited data and eliminating overage charges for their customers.
In the company’s most recent earnings announcement, AT&T CEO Randall Stephenson said, “One year after our acquisition of DirecTV, the success of the integration has exceeded our expectations” and “Cost synergies are ahead of target.”
As a result, the entertainment arm of the company saw revenue soar to $12.71 billion versus $5.78 billion a year prior.
In the chart, Profit Scanner powered by Recognia shows investors taking profits off the table after a big run up in T stock over the past 12 months. The 50-day moving average has broken, immediately followed by five bearish events. Although the pullback has yet to take out a major support level below, investors seeking cheaper entry levels may want to weather the storm a bit longer.
Major price resistance above is found at $43.08, while major support below is located at $34.66. With T currently trading for $40.78, it becomes clear that the risk-to-reward ratio is not very favorable to those going long. To put it plainly, there’s only 5.64% upside compared to 15% downside at current price levels.
Telecom Stocks to Watch: T-Mobile (TMUS)
Click to Enlarge T-Mobile US Inc. (NASDAQ:TMUS) provides mobile communications services for consumers and businesses in the United States, Puerto Rico and the U.S. Virgin Islands.
A relative newcomer to the scene when compared to its peers, T-Mobile is the growth play that has managed to stay competitive by offering pay-as-you-go plans and deploying aggressive rebranding efforts.
In the chart above, you’ll notice TMUS flirting with new annual highs, finding strong support from its 50-day moving average along the way. But after a series of bullish event signals, a bearish one surfaced, indicating that price had moved too far, too soon. Since then, TMUS has bended a bit, but it hasn’t broken. If old highs can be taken out in the weeks ahead, it would once again confirm strength of trend.
Profit Scanner sees long-term support at $38.99, so if sustained bearish price pressures get ugly, investors should be prepared for a pullback of that degree. Ironically enough, this support area happens to be near TMUS’ 200-day price moving average — a common area where buyers looking for a discount are likely to step in and lift TMUS stock higher again.
Telecom Stocks to Watch: Verizon (VZ)
Click to Enlarge Verizon Communications Inc. (NYSE:VZ) is one of the biggest wireless cellular service providers in the United States. Although price wars have been challenging, new opportunities in Cuba could come into play, as the embargo in that region has ended.
Surprisingly enough, shares of VZ have steadily climbed higher in the face of what the company projected to be “flat earnings” throughout 2016. But Verizon isn’t standing still, recently announcing its new 50% faster wireless data speeds for a broad selection of phone and tablets under the “Verizon LTE Advanced” moniker.
In the chart above, we see shares of VZ weave their way from a mid-January low near $43 per share all the way up to the early July peak just shy of $60, only to retreat back to about $53. Since VZ is still making higher price highs and higher price lows, the upward trend remains valid. To invalidate the trend, we would need to see VZ dip below the late May price found just under $50 per share.
Profit Scanner has been a bit sour on the stock since the most recent price peak. When VZ closed at $55.90 on July 8, a bearish event involving the Relative Strength Index hit, warning subscribers that price seemed to be recovering from an overbought state due to the fact that the up days were no longer overwhelming down days to quite the same extent.
Click to Enlarge So, when the RSI fell out of its 70-100 overbought zone, a bearish technical event was triggered.
Since then, there have been three more bearish events, all doing their part in an effort to drive the price of VZ down to $52.09 per share — thus correctly calling the pullback from recent price highs to the tune of 6.81%.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.
