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Telus Corp. Bouncing Off Support

01/30/07 09:02:29 AM
by Gary Grosschadl

Canada's second-largest telecommunications company rose past the $50 mark several months ago and now may be ready to challenge its $65 high.

Security:   T.TO (TSX)
Position:   Buy

Figure 1 shows a rapid move from $50 to $65, including a gap higher. In the short term this move was unsustainable, and the stock corrected to close the gap and find support.

The stock has a history of support at its 50-period exponential moving average (EMA), so coming down to this support test made technical sense. Now that the stock has corrected it is showing signs of another upleg developing. The most obvious trading target in the short term is the previous high area of $64. That is not to say that it can't keep going higher, but some kind of consolidation may be in store, tempting some profit-taking.

FIGURE 1: TELUS, WEEKLY. The Telus stock corrects to its 50-period EMA support.
Graphic provided by:
Several indicators hint at an upleg under way. The moving average convergence/divergence (MACD) has turned up from lower levels and appears to be on the verge of a bullish crossover of its signal line. The relative strength index (RSI) has found support at its often-key area of 50. Meanwhile, the stochastic oscillator is showing a bullish turn from low levels. Moving above its 20 level is normally taken to be the start of an upleg.

If the stock makes a surprise move below the 50 EMA, then the bullish tone of this article is negated and previous lows may be tested. In the meantime, the stock appears to be headed higher.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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