Interactive Investor

Here's what BT needs to avoid collapse

25th January 2017 09:58

Alistair Strang from Trends and Targets

Written: Tue, 24th January 2017 - 23:55

British Telecom & TalkTalk

This pair of paragons of communication excellence managed to clutter up our email. We've a couple of "smarty pants" prior commentaries against each, one from July 2016 giving a target of 309p for BT, and another from November 2015 giving a target of 152p for TalkTalk.

BT closed the 24th January at 303p, TalkTalk closed at 158p with a low of 150p. Both broke our drop targets and, therefore, we need to examine further drop potentials with any ongoing weakness.

British Telecom firstly.

BT has been moved below the uptrend since 2009's crash, closing slightly below our target, and now trading in a region where we can now anticipate 212p with the potential of making an appearance with further weakness.

This number is something we'd regard as "ultimate" bottom due to a current inability to calculate anything below such a point which isn't prefaced with a minus sign. If there's any inherent strength, we'd hope the price would bounce before such a vile bottom.

To even regain the uptrend since 2009, BT.A needs better than 350p currently to better the red line on the chart, but the harsh reality of downtrends suggests we dare not take any rise seriously unless the price betters 394p (blue line on the chart) as this would cancel the potential of 212p making an appearance.

The share price experienced a rather caustic day with the price closing in a position where anything near-term below 297.7p enters the cycle to 212p.

TalkTalk Telecom

We're being a bit disingenuous with our 152p target against TalkTalk as it actually hit it in December.

The drop on the 24th was another stab at target. However, the weakness since the start of 2015 has been relentless, shown with a miserable 'blue' line. Thankfully, TalkTalk has not committed the crime of actually closing below 152p and now making weakness to 122p initially with secondary, if broken, 112p inevitable.

In fact, we're now less comfortable with the potential of 112p and suspect any break of the red line on the chart will find a bounce point by 122p.

Importantly, unlike BT above, TalkTalk has not broken its big picture uptrend (yet) and at time of writing the trend from 2010 is at roughly 151.352p.

As 'blue' shows, TalkTalk needs better 180p currently to escape this downtrend. Ideally, a bunch of folk who believe in chart patterns will identify the two recent moves to 152p as a "double bottom".

If this proves the case, above 'red' can anticipate an initial 205p. Our secondary, if this point is bettered, calculates at 236p, but, to be sane, we'd rather take another look should the 205p thing work out.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.