This story features TELSTRA GROUP LIMITED. For more info SHARE ANALYSIS: TLS
Bottom Line 20/07/16
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: $5.79 – $5.61 / $5.52 – $5.45
Resistance Levels: $6.02 – $6.06 / $6.53 – $6.73
Technical Discussion
Telstra Corporation ((TLS)) is a telecommunications and information services company providing services for domestic and international customers. It is Australia's most prominent telecommunications company with brand recognition across all segments of the industry. On January 21st 2014 it acquired O2 Networks, a developer of data networking and network security software. In May 2014 the Company completed the sale of its Hong Kong based mobiles business CSL to HKT Limited. In July 2014, Telstra acquired an undisclosed minority stake in Telesign Corp. For the six months ending the 31st of December 2015 revenues increased 8% to A$13.68B. Net income before extraordinary items increased 1% to A$2.09B. Revenues reveal the Global enterprise and services section increase of 21% to A$3.17B and the Telstra Retail segment increase of 2% to A$8.62B. The dividend yield is currently 5.3%. Broker/Analyst consensus is “Hold”.
Reasons to retain a bullish stance longer term:
→ Trying break through resistance.
→ A capital management program in FY17 will commence.
→ Has a strong balance sheet.
→ New investment in the mobile network should reap benefits.
→ Earnings growth is anticipated with potential to see dividend increases.
→ In a low interest environment TLS is an alternative to the banks.
The 5-wave movement higher we were looking at during our last review, which was back in mid-May failed to unfold with price rejecting hard from the line of resistance. As such, price is correcting its way higher although it doesn’t detract from the upside potential in any way. Once again TLS finds itself hovering around the line of resistance with a couple more days of strength going a long way to advocating higher prices over the coming weeks. The typical retracement zone of the whole leg down from the high made in February 2015 sits between $5.85 – $6.06 and would be our minimum expectation.
A push up through the latter level would be much more bullish and portend a rotation up toward the recovery highs circa $6.73. For now though we’ll take one pattern at a time and see what transpires if/when the typical retracement zone is tagged. One thing is for sure, it’s been an impulsive leg higher over the past few weeks meaning we are technically in a position to see an attempted breakout. The only real concern is that volume has tapered off significantly during the recent rally which is a trait that needs to change if higher prices are going to be seen any time soon. Without the volume, it’s going to be extremely difficult for traction to continue. Over the short-term the company is looking a little stretched with our oscillator both on the daily and weekly timeframes sitting in the overbought position although no bearish divergence is in place at this juncture. All we can do for now is sit back and see if resistance can be overcome.
Trading Strategy
The strategy is to buy following a push up through today’s high at $5.83, or wait until price closes above today’s high before initiating long positions if you require a little more confirmation. A trailing stop will need to be used to manage the position though the typical retracement zone mentioned above must be watched carefully for signs of distribution. The initial stop should be placed just beneath old resistance/new support at $5.63 which provides a low risk entry. There is no formal recommendation although this is solely down to the amount of pending trades we currently have waiting to trigger. It’s a nice-looking setup if you want to be involved.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
Risk Disclosure Statement
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