Optimism Returning For Telstra

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

The Chartist reports optimism is returning for the Telstra ((TLS)) share price, after having suffered technical damage for several years.

BOTTOM LINE

21/1:
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: $2.96 / $2.66
Resistance Levels: $3.54 / $4.01 / $4.98 – $5.29

Calendar Events:
Report Date: February 11 2021    Ex-Div Date: February 24 2021

TECHNICAL DISCUSSION

Reasons to be cautious (upside potential short-term):
→ Telstra likely selling equity in some of its assets.
→ TowerCo, valued at $5-6bn, is expected to see 50% divested.
→ NBN has not increased revenue projections despite higher investment.
→ Heading higher in an impulsive leg.

Back in October we were looking for price to head lower out of a diamond pattern toward multi-year support. Those lower levels were always going to be a potential reversal zone. During our last review price had reversed hard which was another small step in the right direction. Impulsive price action is always reason to sit up and take notice, especially after witnessing technical damage. That said, the ideal situation following our last review was to see short-term weakness. We haven’t been disappointed. There is now light at the end of the tunnel for Telstra even though it’s early days.

One of the interesting aspects of the chart last time was the gap that had been left. It’s not a prerequisite to fill the gap before seeing higher prices but it’s uncanny how many times it transpires. It’s now a box that can be ticked here. Also note how the gap-fill aligned with a minor line of support, providing confluence. The more confluence there is, the greater the chance it’s going to prove to be significant. No arguments in that department.

Recent price action means we can now put forward a wave count, albeit at smaller degree. The November high completes wave-i or-a. The subsequent retracement was choppy and messy in nature, completing wave-ii or-b right on cue. Over the past three weeks or so there’s been good demand resulting in strong, clean price action.

If the smaller degree patterns prove themselves there’s plenty of upside potential ahead over the coming weeks and even months. As a minimum we’d expect the wave equality projection just beneath $3.60 to be tagged.

The further price gets up through that level the more confident we become. We’ll then start looking at the 1.618 projection just short of $3.90 as being the next target. Before getting carried away let’s see what transpires if/when the wave equality projection comes under pressure.

TRADING STRATEGY

There is no low-risk entry currently but it’s worth putting Telstra on the short-term watchlist. It goes without saying that we are viewing the stock as a recovery play due to the technical damage that’s been inflicted over the years.

That said, even a bounce offers a solid percentage gain from current levels. A micro consolidation pattern or similar would provide an opportunity. It’s something we’ll be looking out for over the coming days and weeks.

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).

This report may contain advice that has been prepared by The Chartist Pty Ltd (ABN 40 641 323 051). The Chartist Pty Ltd is a Corporate Authorised Representative (CAR No. 1282007) of Shartru Wealth Management Pty Ltd ABN 46 158 536 871, AFSL 422409. Any advice is considered general advice and has been prepared without taking into account your objectives, financial situation or needs. Because of that, before acting on this advice you should therefore consider the appropriateness of the advice having regard to your situation and your own objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. If the advice relates to the acquisition, or possible acquisition, of a product (other than a security e.g. a CFD) then the client should obtain the relevant Product Disclosure Document and consider it before making any decision about whether to acquire the product. Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.

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