Canadian communications firm BCE (BCE) had been looking good for most of 2012. Shares were in an uptrend, and the stock was consolidating sideways as investors weighed their next moves -- that is, until Friday. That's when Canadian regulators blocked the firm's $3 billion CAD takeover of Astral, and shares fell around 3%.
I realize that a 3% drop doesn't sound like much. But it's where that 3% drop pushed prices that's significant. BCE had been consolidating sideways in a rectangle pattern, a trading range bounded by a horizontal resistance level above shares and a horizontal support level below them. Friday's 3% move sent shares below support, sparking a sell signal for the stock. I wouldn't go looking for a bargain here.It's useful to think of BCE in real terms. After all, "rectangles" and other geometric shapes don't have some magical powers on a stock chart, they're just easy ways of describing what's going on. Basically, that support level in BCE was a place below which there has historically been a glut of demand for shares -- it's a place where buyers have been more eager to buy shares at a bargain price than sellers were to keep selling. But the breakdown indicates that the demand got sapped after the Astral deal was blocked; with BCE unable to catch a bid, you don't want to be the one who steps in to hold the bag. Wait for this stock to establish support if you're looking for a buying opportunity. Be warned, it could take a while.
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