As the COVID-19 crisis continues to dominate headlines and economic activity around the globe, the critical role that the communication and related services segments play in our society has become ever-more apparent. In this article, we'll take a look at three charts that illustrate how prices across the market segment have toward key levels of support and how they could be poised to make a move higher.
Vanguard Communication Services ETF (VOX)
Long-term active traders who want to get a sense of where a certain market segment is headed often turn to exchange-traded products such as the Vanguard Communication Services ETF (VOX). Fundamentally speaking, as of Feb. 29, this fund comprises 113 companies with a median market capitalization of $209.5 billion.
Taking a look at the chart below, you can see that the extreme sell-off that has occurred over the past several trading sessions has sent the price of the fund toward a multi-year level of support, as identified by the horizontal trendline. Based on the tenets of technical analysis, active traders could use the oversold rating on the relative strength index (RSI) and the notion that this level has propped up prices in the past to position themselves for a bounce back toward the newly formed resistance of the 200-day moving average, which is currently trading at $86.40.
Alphabet Inc. (GOOG)
Active traders who want to identify specific companies within the communication services sector that could be poised to move higher often look to the top holdings of funds such as VOX. In this case, at the end of February, Alphabet Inc. (GOOG) represented 22.20% of the VOX portfolio.
Taking a look at the chart, you'll notice that the bears have sent the price sharply lower and that the current price is trading near the support of a multi-year ascending trendline, which could be presenting followers of technical analysis with an interesting buying opportunity depending on what happens over the days ahead.
Facebook, Inc. (FB)
With a weighting of 15% of the VOX portfolio, Facebook, Inc. (FB) comes in second position. Similar to the cases discussed above, the price of the company's shares has recently dropped toward a key level of support, which could represent a buying opportunity for traders looking to trade a bounce.
As you can see from the weekly chart below, the price has quickly fallen toward the long-term support shown by the two dotted trendlines near $130. These key levels of support have propped up the price of the shares in the past, and active traders would expect this to continue to be the case in the future. The oversold rating on the RSI will also likely be used as confirmation of a short-term move higher over the weeks ahead.
The Bottom Line
The communication services segment of the markets plays a critical role in the modern society. While all sectors have been hit by the coronavirus, the sharp decline in prices could present a buying opportunity in this sub-sector for those willing to take on the risk.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.