This morning the NASDAQ Telecom Index (IXTCX) traded at a new 52- week low and this probably doesn't come as a surprise to the subscribers who have made the association between networking stocks (NWX.X). Months ago I posed the scenario of how networking stocks looked suspect at higher levels as many Common Local Exchange Carriers "CLEC's" as they are called began to have trouble. Until many telecom stocks turn around and start showing strength, my analysis is that many networking stocks won't start showing growth. When this will happen is anyone's guess, but we should monitor the telecom index charts to give us hint when the MARKET starts to believe it is happening. Then and only then would I expect the Networking Index (NWX.X) to show signs of life.
NASDAQ Telecom Index (IXTCX) Chart - last eleven months.
As a technical analyst, I don't think the IXTCX will trade 166, but I MUST realize that the potential is there. From what I've seen in other indexes and these types of retracement brackets using our "fitting" I can't rule out this level. With that in mind, I'm not looking to aggressively accumulate stocks with a telecom theme. However, if I find some telecom stocks that look strong and poised for a short-term turn higher, I'll play those long. I will also look for stocks with a telecom theme that are breaking down as good short candidates. If the IXTCX is going to get to the 166 level, some stocks are going to fall. Why not try some short/put positions on stocks with this theme that look vulnerable to lower prices? One that I thought might be headed lower yesterday was Qualcomm (NASDAQ:QCOM) near $53.88. Our trader's target is $47.25 and current stop is $56.75. The stock needs to close below $53 for us to hold a short position over the weekend. We're following this trade in the "hot list" on PremierMarkets.com.