From the desk of Tom Bruni @BruniCharting
Given our expectation of a choppy market environment over the coming weeks and months, we’re focusing on areas of relative strength/weakness.
Canadian Telecom stocks are hitting new all-time highs on an absolute basis, presenting some new trading opportunities on the long side.
Here’s The TSX Capped Telecom Services Index making new all-time highs on an absolute basis. We were buyers of the pullback towards 170 and the sector has continued to base since. With prices emerging from this 1-year base to new all-time highs, we can define our risk against 183 and look for continuation towards our long-term target near 215.
Click on chart to enlarge view.
In terms of individual stock setups, there are only eight components in this index and two of them look attractive at current levels.
Here’s Telus Corp. breaking out from a multi-year base to new all-time highs. As long as prices are above 51, we can be long with a target near 61.
If you’re a US market participant, Telus Corp. is also listed on the NYSE under ticker symbol TU. As long as prices are above 38.50, we can be long with upside targets near 42.25 and 48.25.
From a longer-term perspective, Quebecor Inc. looks to be setting up for a breakout to new all-time highs. We would be buyers of a breakout above 34, with a long-term target of 52.75.
On a relative basis, the Telecom Services Index is stuck in a sideways range, so we’re not betting on massive outperformance or underperformance from the sector itself. Instead, we want to recognize its strong absolute trend and take advantage of it as long as it remains intact.
Bottom Line: A choppy market environment comes with opportunities on both the long and short sides of the tape. For now, the weight of the evidence suggests Telecom stocks are an area we want to be long.
Thanks for reading and please let us know if you have any questions!