SIA Chartsā relative strength rankings help investors manage risk by identifying stocks and sectors which are relatively underperforming in the short or long term to potentially be avoided as capital appears to be seeking better opportunities elsewhere. Canadian telecommunications company Telus (T.TO) has been consistently scraping the bottom of the SIA S&P/TSX 60 Report for the last several years. Telus left the Favored Green Zone on July 15, 2022, at a price of $28.61 and drilled itself straight to the bottom of the ranks, now in position #59 in the Unfavored Red Zone. Since leaving our Favored Green Zone, Telus has produced a negative rate of return of -27.5% while the broader TSX 60 Index has gained a whopping +24.8%.
So, while many investors are star-struck by its trailing dividend yield of 7.23% they become victim to both the capital erosion and the total opportunity loss of -52.3%, which we aptly refer to as value traps.
Looking at the weekly candlestick chart illustrates the down trend quite clearly with several rally attempts in fall of 2023 and again in spring of 2024 both met with resistance and intensifying selling pressure. The supportive area at the $21 level has been holding for the better part of 12 months with a narrowing wedge forming in the past quarter as we wait for a resolution from this wedge (down or up). The current red weekly candle is making a solid attempt at violating this important $21 level to the downside and is doing so on the back of increasing volume in the past several weeks. Prior attempts to push through $21 have been met with capital inflows that has produced only long shadow wicks with little follow-thru to the downside. To the upside, resistance sits at the $22.50 level at the neckline of the minor rally attempt in early 2024.
Turning next to the Point and Figure chart, scaled at 1%, we again see the fall from grace in summer of 2022 as the chart produced double and triple bottom sell signals.
Of course, these negative chart patterns stand alongside the all-important back drop of residing in the RED zone. Any attempt to rally was met with selling pressure creating a mini downtrend line, highlighted by the thin red line. In terms of any foundation to the price, we find the first level of support at $20.32 and important trend line support (thick green line) at $19.53 with further long-term support at $18.58. To the upside, initial resistance is the 3-box reversal at $21.78 with further push back expected at both the $22.67 and $24.55 levels. With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 1 out of 10, T.TO continues to display short-term weakness across the asset classes.
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