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Telecom Calling

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The Telecommunications Index (XTC) is moving higher after Lucent announced at the SuperComm conference that its long-range turnaround is on track.

Amex Telecommunications Index Daily Chart

The telecom rally seems to have found resistance at the 50-dma and the neckline of a head and shoulders pattern. If those resistance points can be broken, the yearlong downtrend is waiting to push prices lower for the fourth time. It's going take some more good news to get enough buying to push this group higher.

Lucent Daily Chart

Lucent said second-quarter losses and sales would improve by focusing on established phone customers rather than small start- ups on the brink of bankruptcy. Will it be enough to bring the stock back from the brink of Armageddon? Today's .64 point jump helped, but just like the larger index, LU still has to contend with the 50-dma and downtrend. The RSI is turning up, and the last time it did, Lucent was able to rise to about $12. Resistance may have something to say about that this time.

Jeff Canavan
Assistant Analyst
www.premiermarkets.com

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