One of these stocks is not like the other

A reader asked me for a commentary on Canadian telecoms. To cover this sector, I will be looking at the “Big 3” in today’s blog. Please feel free to comment below if you would like any of the Canadian or US sectors covered in a future blog.

Canadian telecoms are not all the same, insofar as investors are concerned. For example, BCE and Telus, whose long termed charts are shown above (click on chart for better detail), are in an uptrend on the weekly charts, although both show a consolidation pattern over much of the summer.

As we can see on BCE’s daily chart above (which displays a similar pattern to Telus), support is holding at this time. BCE has bounced off of $48 twice, which is above its prior low of $47.50. So long as $47.50 is held, the stock should be considered in a consolidation pattern. In this case, it appears that BCE is in the early stages of forming a descending triangle.

I’ve discussed in past blogs this pattern and the mythology that surrounds it. Some technical analysis textbooks suggest that descending triangles are bearish –  I have not found that to be the case. The important thing to watch in any consolidation is a break through either support or resistance. Support on BCE is around $48, and resistance comes in at the descending trendline – which you will have to keep track of as time marches forward. If one of those lines is broken on high volume for more than 3 days, you may have the beginnings of a tradable move. In the meantime, BCE is a hold if you own it, and a “watch” if you don’t. Same goes for Telus. Support on Telus comes in around $37, by the way.

Rogers, on the other hand, is NOT in an uptrend, as seen on the above weekly chart. The stock is clearly stuck in a giant symmetrical triangle. Trading such a formation is very straight forward: Long term buyers should avoid RCI.B until a volume-lead breakout through about $45 occurs. A breakdown below $42 on volume would suggest a shorting opportunity. Between those levels, the stock remains in Never-Never land. Avoid RCI until the stock breaks out of this triangle.

My pal Brooke Thackray, seasonal expert and all-around nice guy, tells me that the seasonal tendencies for telecoms are a bit “fuzzy” given the changing nature of the sector (deregulation, mergers, etc) –this would apply to stocks on both sides of the border, I would think. Nonetheless, he does see a tendency for some outperformance in the US telecoms in December – again, I wouldn’t be surprised if this tendency was mirrored here in Canada.

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