Telecom has been on the rise again. This has been a tough sector for investors to hold over the last year. The net gains have been minor and the volatility has been major. Looking at the chart of IYZ, iShares Telecommunications ETF you can see the result and the volatility. However, from a technical perspective the chart has made another failed run at breaking above the resistance at $20.80 . The pullback is testing support at $19.75  and is important short term. If the sector can hold and bounce back towards the high with some momentum/volume, maybe it finds the necessary catalyst to break higher.

Sifting through the sector you find plenty to like and dislike rather quickly. The winners are easy to spot (IDT, BCE, AMT, Q & VMED) as the uptrends are well established and continue to show strength. The losers are equally easy to spot (CBB, LVLT, LUK & LEAP) with the down trends established and showing continued weakness. The inbetween group of stocks is where the interest lies for me. Many have established a trading range and like IYT, they are in a position to break higher. If they establish themselves on the upside with some momentum to break out, the broader sector will break higher as well.

Returning to the chart and focusing on the technical data, note some key points of interest:

• The long term uptrend line is still in play.
• The resistance near the $20.80 level have been consistent at each attempt to break higher. Respect this level and don’t cheat your entry.
• The short term downtrend (off the April high) was broken on the move higher (off July low), but it is acting as support on the test and pullback last week. If it holds as support look for the upside opportunity. A trade back to $20.80. If it can break above resistance the play could extend higher.
• Some support at the $19.60 level, if it holds look for a trade opportunity. If it fails the long term trendline comes into play as support. (Held in yesterday’s trading and close to an entry point potentially.)
• Weak volume on the selling could be an advantage to bounce off the support at $19.60. 

The current market volatility is making every sector a big question mark. The fundamentals in this sector have improved over the last quarter and the opportunity is attractive. As with any opportunity you must define the entry, exit and target. This allows you to measure the risk reward and it establishes the necessary discipline to put in place.

For specific instruction on this opportunity go to the Watch Page for theETFexchange.com.