A Major Downtrend For Telstra

This story features TELSTRA GROUP LIMITED. For more info SHARE ANALYSIS: TLS

In light of what appears a general view that Telstra ((TLS)) shares can only be a good buy at present share price levels, FNArena found it remarkable that The Chartist had an opposite view on things. Below is the latest assessment as reported to subscribers of The Chartist earlier this week.

There has been no reason to get excited in regard to Telstra for many years though there was room for a short bounce following our last review. The target was more or less tagged but if our analysis is correct the slow demise of the company over the last 10 years or so is likely to continue from this point forward. In fact during that time the stock has lost over 72.0% in value which is significant in anyone’s book, even taking into account the dividends paid throughout that time. The ideal situation would be to see a clean move south taking TLS down to around $2.08 which is the next target area. Should this be the path taken a buying opportunity could present itself though trying to predict a significant bottom is a fruitless exercise. The bottom line is that the company is in a major down trend with no signs of a significant turnaround on the horizon. Even to move to a neutral stance I’d want to see the June 2010 high at $3.46 penetrated with a degree of force which is looking highly unlikely from a technical standpoint.

TECHNICAL:
Although annotating the wave count on such a dire looking chart is difficult it certainly isn’t impossible. In this instance we are better off concentrating on the shorter term patterns as they are tending to show a little more clarity. The labelling put forward last time still remains in position with wave-B almost making its way up to the upper channel boundary which shows good confluence with the 50.0% retracement level and the wave equality projection. If we are seeing a 3-leg retracement from the high of wave-(X) wave-C should be in its early stages and will ideally subdivide into a 5-wave movement. The wave equality projection sits down at $ 2.08 as mentioned above. That may seem a long way from current levels but there is every chance of getting down to those depths over the coming five months or so. In fact, if the second phase of the combination pattern takes a similar time to the first then we’d be looking for a low point around early September which is even further down the track. Not a great deal of comfort for holders of the stock but a very real possibility nonetheless. We’ve had Telstra in the “dog category” for some time now and there is no reason to change this view. It has been, and remains extremely weak with this trait likely to last well into the future.

Trading Strategy
3/3:
Unless you’re a very nimble swing trader there is absolutely no reason to be involved with Telstra at this juncture. In fact investors should put any thoughts regarding looking for a buying opportunity out of their heads for the foreseeable future. In the unlikely event that a turnaround takes place we’ll bring it to your attention on these pages though I certainly wouldn’t be holding your breath. There are a myriad of companies showing far better patterns though we’ll continue to review the stock as many subscribers retain an interest.

Re-published with permission of the publisher. www.thechartist.com.au
All copyright remains with the publisher.

The above views expressed are not FNArena's (see our disclaimer).

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Technical problems

Readers should note that due to technical problems we were unable to include a chart.

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