5 Telecom Stocks Breaking Out Ahead of Earnings

Frontier Communications

Frontier Communications (FTR) is a buy right now because it's not a sell. I realize that sounds a bit bizarre, but bear with me.

Frontier has been a big outlier in the telecom sector. While the rest of the sector has rallied 17.8% so far in 2012, FTR has actually managed to slide 22.7% over that same period, dramatically underperforming its peers. Frontier's decline was orderly, though, bounded by a well-defined trend line resistance level acting as a sort of ceiling for share prices. Now, with that trend line resistance level broken, FTR looks like a buying opportunity.

>>7 High-Volume Stocks With Relative Strength

The fact that Frontier broke through resistance tells us that buyers have become more eager to buy at FTR's current prices than sellers are to sell. That's presenting a solid buying opportunity.

Momentum is looking strong too. It moved from its bearish range (not climbing above 50) to a bullish range with support at 50 -- yes, RSI can have support and resistance too. I'd recommend buying here with a protective stop at the 50-day moving average, which has acted as a good proxy for trendline resistance since the downtrend started in FTR. If shares break below the 50-day again, we know that this stock's newfound uptrend has lost its steam and it's time to walk away.

Watch out for second-quarter earnings on July 31.

For another take on Frontier, it shows up on a recent list of 6 Sucker Stocks to Avoid at All Costs.

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