Telecommunication stocks have been moving higher in recent weeks due to the shift and associated demand for fifth-generation wireless technology (5G). This change to 5G is likely to become the de facto standard when it comes to cellular networks across North America. In this article, we'll look at charts across the telecom sector and try to determine how followers of technical analysis will be looking to position themselves over the weeks and months ahead.
SPDR S&P Telecom ETF (XTL)
For active traders interested in telecom, many will most likely look to exchange-traded funds such as the SPDR S&P Telecom ETF (XTL). As you can see from the chart below, the strong bounce from the March lows has sent the price above the long-term resistance of the 50-day and 200-day moving averages.
The recent retracement toward the dotted trendline has many traders interested in betting on a bounce higher. Based on the pattern shown, traders will most likely buy as close to the 50-day moving average or dotted trendline as possible and then protect against a selloff by placing stops below $68.54 in case of a sudden shift in sentiment.
Infinera Corporation (INFN)
As one of the top holdings of the XTL ETF, Infinera Corporation (INFN) will likely capture the attention of active traders over the days ahead. As you can see below, the price has recently triggered a bullish crossover between the 50-day and 200-day moving averages in a move known as the golden cross (shown by the blue circle).
This long-term technical buy signal is used by active traders to mark the start of a long-term uptrend. Based on this pattern, traders will likely hold a bullish bias on Infinera stock until the price closes below the support of the 200-day moving average or until other major indicators suggest a change in control.
Vonage Holdings Corp. (VG)
Another top holding of XTL that may be of specific interest to active traders is Vonage Holdings Corp. (VG). As you can see below, the price has recently risen above the long-term support of the 50-day and 200-day moving averages.
The recent uptick in momentum has triggered a bullish crossover between the long-term moving averages (known as the golden cross), which is commonly used to mark the beginning of a long-term uptrend. Based on the pattern and on risk tolerance, active traders will most likely hold a bullish outlook on the stock until the price closes below one of the aforementioned levels of support.
The Bottom Line
Telecom companies have risen to prominence in recent months due to the shift to 5G cellular networks. As demand continues to rise, the leaders in the sector will undoubtedly be targets of active traders' attention. Based on the charts discussed above, the sector could be poised for a significant move higher over the weeks and months ahead.
As of the time of writing, Casey Murphy did not own a position in any of the assets mentioned.
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