The Telecom Stock to Target Right Now

The IYZ is rebounding from annual-low territory

Nov 22, 2017 at 10:27 AM
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It's been a rocky year for most telecom stocks, as evidenced by the price action of the iShares U.S. Telecommunications ETF (IYZ). The exchange-traded fund (ETF) has been exploring a channel of lower highs and lows since its early 2017 peak, and plummeted to a new annual low in early November, after Sprint (S) and T-Mobile (TMUS) called off their merger. Against this backdrop -- and with AT&T (T) battling for Time Warner (TWX), plus net neutrality back in the spotlight -- we decided to take a closer look at IYZ and telecom stocks, including one that tends to outperform during Black Friday week.

Big Day in December

Ajit Pai, the head of the Federal Communications Commission (FCC) and a Trump appointee, yesterday announced plans to repeal the net neutrality rules implemented in 2015. If the commission -- comprised of three Republicans and two Democrats -- votes to walk back the rules on Dec. 14, it would be considered a victory for big telecom companies like AT&T and Verizon (VZ). However, House Minority Leader Nancy Pelosi said the FCC chair has "launched an all-out assault on the entrepreneurship, innovation, and competition at the heart of the internet."

IYZ in Rebound Mode

The shares of IYZ, meanwhile, ended Tuesday 0.9% higher at $28.79, securing a fifth-straight daily gain. The fund last week snapped a five-week losing streak, but is still staring up at a trendline connecting lower lows since early 2017. This region could now act as a roadblock for IYZ. In addition, the $29.50-$30 area could be a speed bump for the ETF, as this neighborhood contained pullbacks since early 2016.

IYZ stock chart

Still, aside from oil ETFs, IYZ sports the steepest year-to-date loss of all funds we track, down nearly 16%. Likewise, outside of precious metals, the telecom sector has the fewest stocks trading above their 80-day moving average, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Specifically, not even 40% of the 35 telecom stocks we track are north of this trendline.

The Telecom Stock That Could Waddle Higher This Week

However, one of the few telecom stocks above its 80-day is SBA Communications Corporation (NASDAQ:SBAC). The equity has skyrocketed more than 61% in 2017, and touched a record high of $170.81 earlier this month. What's more, SBAC is among the best stocks to own during the week of Thanksgiving, looking at returns over the past 10 years.

SBA Communications stock has averaged a holiday-week gain of 5.4% in the past decade, ending higher 80% of the time. The equity closed Tuesday at $167.83, up just 1.3% so far this week. Should SBAC once again rally 5.4% from last week's close, the security could be exploring record highs in no time.


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