Telecom Stocks Fall Into Shorter-Term Downtrends

On March 30, we took a look at the S&P 500 Telecom sector and how every member was above their short-, medium- and long-term moving averages. When that has happened in the past, the sector tended to struggle in the shorter-term.

That was nearly the peak for the sector, which has corrected 5.5% from that date. And now every member is below their short- and medium-term averages but most are still above their long-term one.

There haven't been a lot of instances when all members were below their short- and medium-term averages but at least half were still in long-term uptrends. Future returns were good over the next two weeks, with positive returns all 6 times. There were some losses after that, though by six months later it was higher 5 of the 6 times.

If we ignore the long-term average and just look at times when all members were below their short- and medium-term trends, then we still see a mostly positive bias over the next two weeks (excluding instances that occurred within a month of each other). Two weeks later, telecom showed a positive return 18 out of 23 times. The medium-term wasn't so good, with only 8 positive returns. Based on this, it looks like a decent trade but not necessarily investment.