I have noted my long position in BCE—purchased at around $56 after the breakout through that multi-month ceiling in October. In fact, it was a Top Pick on my recent BNN appearances. Recently, the telecom space took a hit – most notably on shares of Telus- but also affecting Rogers and BCE. I’ve received a few requests to follow up on this pick, and on the telecom space – so I thought I would address the sector in today’s blog.
We’ll start with BCE.
BCE broke out through its ceiling of $54.50-ish back in October. We bought the stock at a few pennies over $56 in the second week of that month, noting the confirmed breakout and positive volume. The stock proceeded to climb, but along came the early winter broad market volatility- sending BCE down below its breakout point. Yikes! However – using my 3-day rule, the stocks break of $54.50 lasted less than 3 days and appears to be firming up above that break point again. The stock has not approached the bottom of its old trading range—which lies around $51.50. Further, we don’t tend to sell stocks in knee jerk broad market movements that we view as temporary—case in point, the recent selloff on the markets is likely to be contained within the sideways range it’s been stuck in for the past year. You don’t want to get caught panic selling in a short termed over reaction that has a high probability of recovery. Assuming that the stock you hold does not have unique problems.
Comparative relative strength- middle pane – is excellent. Moneyflow, bottom pane, is getting choppy – longer termed trend (weekly chart not shown) is positive. The stock sits just above its key 200 day MA and is showing early signs of recovery via its momentum indicators. MACD has not hooked up yet, but RSI and Stochastics have shown positive hooks.
Telus
Telus broke the bottom of its major trading range (just under $40) recently. Its below its major MA’s. Comparative strength vs. the TSX (middle pane) is flat. MACD is not hooking, but Stochastics and RSI are hooking up. Moneyflow is bearish on both daily and weekly charts (weekly not shown)
Rogers
Rogers seems to have the best looking daily chart of the group. Rogers is well above its $46 breakout point. The stock sits well above its key MA’s, it has positive relative strength vs. the TSX, and even MACD is trying (although has not yet) to hook up. Other momentum oscillators are hooking. Moneyflow is the best of the group—its trending positively on both short and weekly charts.
Conclusion
Rogers and BCE are the better charts in the sector. The recent pullback was likely in reaction to a broader market movement, not a stock specific event. I continue to hold BCE – and would suggest investors long this stock or Rogers do the same at this time. Telus may turn around in the near term, but there is a wide level of overhead resistance that will likely contain the stock from too much upside.
Keith on BNN this Friday
I will be on BNN’s call-in show MarketCall Tonight Friday December 18, 2015 at from 6:00pm to 7:00pm. Tune in to BNN to catch me live on BNN’s premier call-in show, where viewers like yourself can ask my technical opinion on the stocks you hold.
Call in with questions during the show’s live taping between 6:00 and 7:00 pm. The toll free number for questions is 1 855 326 6266. You can also email questions ahead of time to marketcall@bnn.ca – it’s important that you specify they are for me.
Hi Keith,
Shaw is going to buy Wind Mobile with approval of government and shareholders. Would you continue to buy BCE to average down? Do you think it will be able to overcome the threat of this potential competitor? Would you continue to hold BCE? Thanks.
I don’t think that BCE will be immediately threatened.
The market reaction is likely an excuse to sell (esp. TELUS). Shaw has made a number of mistakes over the years. Try the home phone thing. Try the halted build-out in 08, they’ll throw a ton of money into this hole. Numerous attempts to disrupt the big 3 havent succeeded, the big 3 have way too much experience and money and the management at Shaw arent young disruptors. Likely a buying opportunity …..
Good observation Bob–as you will note–Craig would seem to agree with your thoughts
John–Here is an answer from ValueTrend fundamental analyst Craig Aucoin:
“BCE I see as the best racehorse in the space right now. The Shaw/Wind merger will at some point be a real competitor for Telus in the west. My understanding is that a significant amount of work /capital will be required to open up this wireless option. While the competition bureau may give the required blessing, the impact on BCE may not be felt that greatly. The infrastructure that BCE already has in place gives me the confidence that they will continue to grow market share now.”
I will assume yesterday’s comments stand despite today’s action? Thanks Keith.
Yes–the stock seems to be quite market-sensitive – today is a selling day, so down it went. I will comment more on BNN tomorrow 6:00pm on this stock.
Looks like were setting up for a huge run up last two weeks of the year. S&P has pulled back into support and looks to be forming a bull flag pattern.
I do tend to agree Dave–that was the overall thesis of my BNN spot on Friday. But I also suggested sell in early January—I’ll post the link in today’s blog.
TOPPING STRUCTURE IN U.S.?
BULLISH PERCENT LOW ON U.S. INDICES
NUMBER OF STOCKS OVER 200DMA AT LOW POINT
SUMMATION INDEX LOW AS WELL
COMMODITIES PROBLEM, A MAJOR ONE
$USD FLAT ON THE YEAR (IS COMMODITIES PROBLEM THE $USD FAULT?)
CAN WE MOTIVATE COMMODITIES DEMAND?
BTW, TSX BULLISH PERCENT IS AT 37% AND STOCKS OVER 200DMA AT 29% (WEAK READING)
WILL SANTA DELIVER ON YEAR END?
SEASON’S GREETING
J.P.
Hey JP–see my BNN spot from Friday re my market prognosis–but that is the question of the day isn’t it?!
all the best over the holidays–thanks for being a long-timer on this blog too, BTW.
Keith it seems strange that Disney would fall considering the box office takings of StarWars. Also interesting after reviewing BNN guest video, how a few recommend or talked of Disney as a great trade. Crowded long perhaps?
I think its worry over ESPN and the downward spiral that segment of their business is in.