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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (40772)	3/3/2004 3:45:44 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69126

Schaeffer's Midday Sector Update: Calling Up Telecommunications The telecommunications sector has been an impressive performer, as the group has soared 61 percent in the past 12 months. As the following chart of the North American Telecommunication Index (XTC-645.98) shows, the prior year's rally had been slow and steady before tacking on substantial gains in December and January. Despite this strong performance, speculators and Wall Street analyst have not been particularly enamored of the sector. Let's start first by examining the sentiment data among Wall Street analysts, according to Zacks. Of the more than 242 analyst rankings on the telecommunication sector, 69 percent of these ratings are currently "holds" or "sells." In fact, of all the sectors we currently track here at Schaeffer's, the telecommunications sector has the highest percentage of total analyst rankings classified as "sell" ratings (at 22 percent). Now keep in mind that this is a sector that is up 61 percent in the past 12 months and 12 percent year to date. Using Zacks analyst rankings data, this is the least loved sector on Wall Street. Options speculators are also not very enthusiastic toward the group. The current sector Schaeffer's put/call open interest ratio (SOIR) stands at 0.64, which is higher than 72 percent of the past year's worth of readings. You can see from the following chart of the sector put/call ratio that options speculators have in fact been growing increasingly pessimistic as the sector has been trending steadily higher. In fact, the SOIR jumped substantially in conjunction with XTC's recent 12-percent climb. The observance of options speculators placing bearish bets against a prevailing uptrend is very bullish from our contrarian perspective. Sector short interest is also notable. Total sector short interest has steadily climbed over the past year from a low 521 million shares sold short to its current reading 576 million shares short. While these two readings are not that significantly different, it does indicate that stock speculators, in addition to options speculators, have been betting against the prevailing uptrend. Dividends once again come into play for the third week in a row. While unlike prior weeks, not every telecommunication stock pays a dividend. However, there are several companies within the group that do pay. SBC Communications (SBC: sentiment, chart, options) yields a beefy 5.17 percent while AT&T (T: sentiment, chart, options) currently yields a substantial 4.65 percent. In addition, BellSouth (BLS: sentiment, chart, options) pays investors 3.6 percent. In light of the current low yields offered by money markets, savings accounts, and CDs, the telecommunication sector may one place for investors interested in income to look allocate investment dollars. Once again the combination of pessimistic sentiment from Wall Street analysts, options speculators, and stock speculators provides an attractive backdrop for the continuation of the current uptrend in the XTC. This sentiment picture in combination with strong price action and the opportunity for income through dividends makes for a particularly attractive investment option. - Ron Taylor