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Sprint PCS adds to bullishness in telecom

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Recently we put together a hypothetical portfolio of the 30 Dow Components. Two stocks that stood out with some "sector likeness" were AT&T (NYSE:T) and SBC Communications (NYSE:SBC) as both of these stocks were acting strong relative to other components in the Dow Industrials.

Sometime ago, we had mentioned shares of Sprint PCS (NYSE:PCS) as a stock for traders to be keeping an eye on. I had forgotten all about the stock, but today an old alert on my trade station at $27 was triggered to the upside. We're "rolling up" retracement on PCS to get an idea of how to perhaps manage a bullish trade in a group that continues to gain some favor.

Sprint Corp. (PCS) - last 10 months

Shares of Sprint PCS (PCS) have also been trading bullish in recent weeks. Back in August, we noted a HUGE spike in volume on August 8th at the $25 level. The stock oscillated back and forth between the $22 and $26 levels, but now looks like she wants to try and push the envelope higher. Resistance at the $27.69 level has been a point of contention for much of this year, but a move above that level could see the stock trading $29-$32. Point and figure chart shows shares of PCS setting up a triple top buy signal at $28. The current vertical count indicates a potential longer-term bullish price objective of $31.50. In the current market environment, I'd exercise some caution with PCS at current levels and look for the stock to pull back closer to the $25 level. Currently, a 1/2 position bullish makes sense as some telecom service stocks like T and SBC have also been acting well. The recent break above the 200-day MA did not come on volume and this has me thinking the stock might be able to pull back for better entry.

Broader market gains

We've got a nice broad market rally underway today. Traders might want to remember that today is the last day of the quarter and mutual fund managers are most likely finishing off their "window dressing" activities. There will also be some stocks that get "undressed" as fund managers dump those stocks on rallies. Try to avoid shorter-term bullish trading in stocks that are hovering near 52-week lows as these stocks stand a higher likelihood of getting sold on strength as fund managers remove some losses from their portfolios.

Jeff Bailey
Senior Market Technician

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