Is It A Throwback Time For Telstra Corporation?

  • Apr 07, 2019 AEST
  • Team Kalkine
Is It A Throwback Time For Telstra Corporation?

Telstra Corporation Limited (ASX: TLS) operates in the telecommunication services sector and is based out of Melbourne, Australia. The company offers a huge range of telecommunication services. In Australia, it caters to a huge customer base by providing 3.6 million retail fixed broadband service, 4.9 million retail fixed voice services and 17.7 million retail mobile services.

We have witnessed a classic bull and bear run in the stock which completes the full cycle for it. The entire stock market (as a whole) or a specific sector or a company is expected to move in cycles (completing both a bull phase and a bear phase). The premise is that every time every sector/stock/index cannot see a booming phase or a busting phase.

The fundamentals change, the economy rises and falls, governments change, uncertainty in the national and global scenario are some of the factors that lead to a boom or bust in the company/sector/index.

Same has been seen in the Telstra Corporation shares. The stock price was trading around A$2.6 odd levels in November 2010. After a few months, the stock started to rally which initiated a bull run, and it continued for almost four years during which the stock price soared to almost A$6.7 odd levels in February 2015, that’s about 150%+ return. As we have mentioned earlier any phase cannot sustain forever and the longer the current trend is, the stronger the opposite trend is expected to be established once the current phase (bull or bear) gets over.

Same happened with Telstra, after touching highs of A$6.7 odd levels, the price started to fall. A bear market was not expected up to this point, but the prices fell continuously, and without giving any relief to the investors the stock entered the bear market which dragged the stock down to almost the levels of A$2.6 (from where the initial bull phase started). This meant all the gains were wiped out within four years or in other words the stock was down by more than 60% for its high. This is the kind of wealth destruction that a bear run can do.

After falling to the previous odd levels of A$2.6, the buying started to kick in, and the stock started to rise. This has created a very strong support level around A$2.6. In fact, the stock rallied to a high of A$3.3 within a few weeks, indicating buyers’ interest around these levels. After this high, the stock again started to fall but this time reversed from A$2.78 to again cross A$3.3. This time the stock was not able to breach its previous low of A$2.6 odd levels and reversed from there. In technical terms, it is known as the halt of “lower low formation” which is a halt in the downtrend.

Now, what to expect?

The stock is trading at A$3.270 as of 5th April 2019 and any fall till the well-established support level of A$2.6 is not to be worried about, as per market analysts. It is to be seen if a new positive trend is established given the new formation of Higher highs starts from here.


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