The bounce from the March lows has sent the prices of assets in many sectors back above their respective 200-day moving averages. This key indicator is required by active traders for the signal of a long-term move higher, and on the basis of the models discussed below, it seems as if a field that is likely to arouse the attention of traders in the days and weeks to come is that of telecommunications. We will take a closer look at maps and try to determine how the followers of the technical analysis, will seek to position itself to take advantage of the move higher.
SPDR S&P Telecom ETF (XTL)
Traders who are looking to gain exposure to a niche sector often turn to one of the 21 S&P Industry Indices. In the case of telecommunications, most traders will look for the S&P Telecom Select Industry Index, which is what the leaders of the SPDR S&P Telecom ETF (XTL) use of the runway before the deduction of fees and expenses. As you can see on the chart below, the fund price has recently broken above its 200-day moving average and found support in the level on each attempt of retracement in the last few weeks.
The upward trend has also triggered a bullish crossover between the 50-day and 200-day moving average, known as the golden cross, which is common for long-term buy signal, which is used by is to mark the beginning of a long-term bullish. Based on this model, we expect bullish traders to enter a position as close to current levels as possible and to protect against a sudden change in fundamentals by placing stop-loss orders below $67.05.
Inseego Corp (INSG)
As the top of the holding of the XTL ETF, Inseego Corp (INSG) is one of the relatively underfollowed of the communications equipment business in the united States. With a market capitalization of more than $ 1 billion, the company is still considered as relatively low.
Based on the model presented below, there seems to be a lot of upward potential remains. The step-like pattern shown on the weekly chart clearly shows that the bulls are in control of the long-term trend. The buy orders and stop-loss orders will probably be near one of the dashed lines, the curves, the trend, based on risk tolerance and investment horizon.
Vonage Holdings Corp (VG)
As another of the holding of the XTL ETF, Vonage Holdings Corp (VG) is another telecommunications company that seems poised to make a move higher over the coming weeks. As you can see below, the price has rebounded on its 200-day moving average, which will likely be used as a confirmation for the bulls to reassert that the group is well in control of the amount of movement.
The recent ends at near the long term resistance near $11 will also likely be monitored closely in the days to come. A movement above this level is likely to be the catalyst needed to signal the beginning of the next, higher stage.
The Bottom Line
Telecom is one of the areas of the market that tends to be relatively underfollowed because of preferences for other segments such as hardware, software, precious metals, and health care. As discussed above, the farm near great levels of support combined with the long-term moving average crosses suggest that this group might just be starting a major long term higher.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.