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Telus A Buy?

10/17/11 10:06:43 AM
by Koos van der Merwe

Telus has formed a symmetrical triangle.

Security:   T-T
Position:   Buy

A symmetrical triangle is formed by a succession of price fluctuations, each of which is smaller than its predecessor. By definition it must have at least four reversal points. From the final point, a breakout may occur at any time. More powerful moves are found when prices break out decisively at a point somewhere between half and three-quarters of the distance between the left side of the triangle and the apex. Do note that that they are not as reliable as a head & shoulders pattern because of false breakouts, but they can be used reliably to suggest a target price once a breakout is confirmed and maintained. However, one must watch the apex, because reversals could occur at that point.

FIGURE 1: TELUS, MONTHLY. Telus is showing that a triangle has formed.
Graphic provided by: AdvancedGET.
Figure 1 is a chart of Telus listed on the Toronto Stock Exchange. The chart shows how the price has risen strongly from a low of $32.08 on February 2010 to a high of $55.08 by July 2011. From that point, the price has moved sideways in a triangle formation and has broken out after showing four reversal points. The apex of the triangle is February 2012, which means that we could expect the price to rise until that date. The target high suggested is $72.52 (55.08 - 32.08 = 23 + 49.52 = 72.52).

Of course, there will be corrections along the way, but with a target price that is 42.53% above today's price of $54.08, the share is definitely worth a buy.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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