What are we looking at?
Canadian and U.S. telecom stocks.
The screen
We limited our pool to the S&P/TSX 60 index and the S&P 100 index.
To find the most promising, we looked at each stock's 40-week moving average (40wMA). This is the average closing price for the stock over a period of 40 weeks. Charting the moving average week by week gives us a sense of investors' behaviour. Are they growing more (or less) enthusiastic about the company's outlook and are they more (or less) likely to purchase the stock? Generally speaking, stocks that trade above their rising 40wMAs are the best candidates for investments; they are the ones that show a bullish pattern. We identified the status of each stocks average (rising, falling or flat) in the adjoining table.
We chose this indicator because stocks tend to stay relatively close to their 40wMAs. When stocks rise far above this average, investors often use this as an opportunity for profit taking, since this usually leads to a price correction toward the 40wMA. Similarly, when stocks decline far below this average, suggesting a change in trend, investors can usually expect a recovery rally to follow toward the average, which also provides a selling opportunity.
More about Phases & Cycles
Phases & Cycles Inc. has been providing independent research for over 24 years, using behaviour analysis. It publishes investment ideas for both the Canadian and U.S. equity markets. Its research reaches more than 1,000 users across North America and Europe.
What did we find?
There are six telecom stocks in the S&P/TSX 60 and S&P 100 indexes. Three of these six have a rising 40wMA and are trading above their rising moving average: BCE Inc., Rogers Communications Inc. and Telus Corp.. The other three – AT&T Inc., Qualcomm Inc. and Verizon Communications Inc. – are trading below their average. AT&T and Verizon are currently oversold and may have a minor recovery rally toward their moving averages to provide a selling opportunity. Qualcomm, on the other hand, has already rallied toward its average and will likely soon resume the downward trend.
Readers should consult a professional before making investment decisions.
Ron Meisels is the director of research and Monica Rizk is the senior technical analyst for Phases & Cycles Inc. (www.phases-cycles.com). They may hold shares in companies profiled.