BALTIMORE (Stockpickr) -- Stocks sold off yesterday, with the big S&P 500 index losing more than 1% by the time the closing bell rang. Most sectors followed suit in the decline. Energy stocks dropped 1.8%, on average. Tech stocks shed 1.28%.
But one group of stocks had an easier go of it: the telcos. And when one sector is standing out over the rest of the pack, it makes sense to take a closer look.
A lot of yesterday's strong showing in the telecom sector had to do with the announcement that Charter Communications (CHTR) would buy larger cable utility Time Warner Cable (TWC); both stocks popped on the news. But some of the most interesting stock setups in the communications business actually have nothing to do with the deal. For a closer look at those potentially profitable trades, we're turning to the charts for some stocks with breakout potential.
Today, we'll look at bullish technical setups in five big telecom and cable companies.
For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
Without further ado, let's take a look at five technical setups worth trading now.
Up first on the list is cable giant Comcast (CMCSA), the spurned former suitor of Time Warner Cable. The TWC deal has everything to do with CMCSA's ability to move 1.24% during Tuesday's session, one of the few mega-cap stocks that ended higher yesterday. (For its part, Comcast is applauding the arrangement, which clears the way for another potential consolidation down the road.)
The thing is, Tuesday's jump could just be the beginning. Comcast looks bullish in the long-term.
Comcast is currently forming an ascending triangle pattern, a bullish price setup that's formed by horizontal resistance above shares (in this case up at $60), and uptrending support to the downside. Basically, as shares bounce in between those two technically-important price levels, they've been getting squeezed closer to a breakout above our $60 price ceiling. When that happens, it's time to be a buyer in CMCSA.
Momentum, measured by 14-day RSI, adds some extra confidence to the upside trade in Comcast. That's because CMCSA's price momentum has been making higher lows going back to last fall, providing confirmation that buying pressure is building here. If $60 gets taken out, then it's time to join those buyers.
Atlantic Tele-Network (ATNI) may be a whole lot smaller than Comcast (this telecom company has a billion-dollar market capitalization, versus a whopping $147 billion market cap at Comcast), we're seeing the exact same price setup here.
For ATNI, the price level to watch is a long-term ceiling up at $73. If shares can catch a bid above that level, we've got a buy signal.
Why all of that significance at that $73 level? It all comes down to buyers and sellers. Price patterns, like this ascending triangle pattern in Atlantic Tele-Network, are a good quick way to identify what's going on in the price action, but they're not the actual reason a stock is tradable. Instead, the "why" comes down to basic supply and demand for ATNI's stock.
The $73 resistance level is a price where there has been an excess of supply of shares; in other words, it's a spot where sellers have previously been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above $73 so significant – the move means that buyers are finally strong enough to absorb all of the excess supply above that price level. It's important to be reactionary on this trade; just like with Comcast, don't buy ATNI until buyers are able to shove this stock above resistance.