This week, I’m taking a look at Telstra, but first, a quick wrap of my calls over the past four weeks:
- 12 March 2012: Spark Infrastructure (SKI) $1.365, buy. Now $1.52, up 11.3%. Position still open.
- 19 March 2012: Envestra (ENV) $0.80 (ex div 2.9c) = $0.771, buy. Now $0.80, up 3.7%. Position still open.
- 26 March 2012: Shanghai Stock Exchange 2,349, short. (If you followed my interview on Switzer 22 March 2012 [1], the Shanghai Stock Exchange was 2,375, short.) Closed out on 1 April 2,262, fall of 5% predicted. In that interview, the second BIG support marked “S” was in fact 2,262. Position Closed.
- 2 April 2012: Gold buy $1,672, stopped out $1,631 for a loss of 2.5% on 4 April 2012. Position Closed.
Now onto Telstra, the Chart of this week.
I have spoken of Telstra previously on the following three occasions, and correctly predicted its move:
1) Switzer TV [2], on Sky Business, 22 April 2010. In this interview, it was the last chart we discussed. You can jump straight to it if you wish, time marked at 12.42. The stock was $3.18 at the time and a low side target of $2.51 was projected. A fall of 26%.
2) The follow-up was in an article dated 20 March 2011, titled Telstra – is it a buy yet [3]? It was $2.64, and had just reached a low of $2.55. My target of $2.51 was counted as having been met. The article questions whether Telstra was now a buy.
3) The last article is dated 27 June 2011, titled, “Is Telstra a buy yet, Dad? [4]” At the time Telstra was at $2.89 and my advice to my son was, “Son, it’s been over 10 years, let’s start accumulating.” My target was $3.31. This 14.5% target has been met while collecting dividends along the way, including 14 cents in September 2011 and 14 cents in March 2012. The total return was 24.2%.
Here is an update to the chart of this stock. You can see all of my prior annotations of the last three times I have spoken of the stock with new annotations updated on the right of the Chart.
What I like about the chart, now $3.35 (based on last close):
1) The 200-day moving average is still pointing up (long yellow line).
2) There is a trading range broadly identified by the two white upward sloping lines. The upper white line is currently around $3.60, and the lower white line is around $3.21. The bottom of the range is also bound by the yellow 200-day moving average at $3.16. It is expected that trading ought to be contained within these three lines.
3) No indications of an overbought situation, despite hitting my $3.31 target. A ‘steady as she goes’ increase is expected until overbought signals surface. This has not occurred yet.
4) You are buying into an upward trend.
5) Buy the first parcel around my old target $3.31. Then another later, and slowly accumulate. One should not go boots and all into this stock right at the current price.
What I don’t like?
1) My $3.31 target has been hit. At around these levels, people who had bought around June of 2011 would already be up 24% and are/have been taking profit. Buying here is a bit late.
2) There will be a period of consolidation around here. For how long? I don’t know. I have extended the golden yellow line of a $3.31 target projected from June 2011 across and you will note, the stock is beginning to trade around this price point. Only when this is over can the stock continue to steadily appreciate. The trend (for now) is your friend, so accumulate on the dips.
3) Not shown here on the chart, there is a death cross. This warns of a change in the trend. A break of the 200-day moving average would be further indication that the trend has changed. This has not yet happened, which is why I remain positive on the stock.
Short-term trades
Please note that my views are not for the long-term. My method results in views expressed that relate to an outlook that lasts weeks or at most months. For example, my view on Shanghai’s Index has for now been met and completed since 22 March 2012, 11 days later. In regards to Shanghai, I am currently in a cautionary observant position. Your utilisation of this information needs to take into account the timeframe I set. The stocks recommended as “Steady as she goes” may be held for the longer term, which for me means months.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Also in the Switzer Super Report
- Peter Switzer: Should we sell up now? [5]
- Paul Rickard: How to invest overseas [6]
- Rudi Filapek-Vandyck: The broker wrap: only one company rated Buy [7]
- Tony Negline: Three foolish SMSFs and their punishments [8]