T-Mobile US, Inc. (TMUS) has broken out above February resistance and is trading at an all-time high, just two months after completing its merger with Sprint Corp. The hook-up reduces the number of major telecommunications providers to just three: T-Mobile, Verizon Communications Inc. (VZ), and AT&T Inc. (T). Rivals have struggled since the deal was finalized, but the new landscape should allow the companies to increase prices at a quicker pace. The fate of the hotly contested net neutrality repeal could benefit these issues as well, opening the door to a la carte charges for high-demand services like Netflix, Inc. (NFLX).

But not everyone is bullish about the outlook for T-Mobile. In May, BofA/Merrill analyst David Barden advised that Japan's Softbank was looking to sell up to $20 billion in stock, prompting a downgrade from Guggenheim. Other analysts have maintained bullish ratings, but there's been no confirmation about the sales, which could act as a major headwind. At this point, investors may need to wait for the company's July 23 earnings release to get a much-needed update.

TMUS Long-Term Chart (2007 – 2020)

Long-term chart showing the share price performance of T-Mobile US, Inc. (TMUS)
TradingView.com

T-Mobile's long-term chart is pieced together through a series of mergers and acquisitions, as well as accounting changes by parent Deutsche Telecom. It came public in its current incarnation in the upper $20s in May 2007 and entered a brief uptrend that topped out at $40.87. That marked the highest high for the next eight years, ahead of a steady decline that accelerated into the start of the new decade. The stock posted an all-time low at $5.52 at that time, but the subsequent uptick stalled in the upper teens in 2011.

A successful support test in 2012 completed a long-term double bottom reversal, setting the stage for a steady uptick that accelerated after the company issued a 2013 reverse stock split. This buying impulse ended five points under the 2007 high in 2014, ahead of a 2015 breakout that generated healthy buying interest into the 2017 high at $68.88. Price action then eased into a rectangular trading range, denying breakout buyers for the next two years.

A 2019 breakout generated multiple whipsaws throughout the year and into 2020, with merger speculation spiking volatility. It surged to a new high at $101.35 in February and collapsed with world markets, dropping nearly 38 points into March's 14-month low at $63.50. The subsequent recovery wave completed a V-shaped pattern into the first quarter high on May 18, giving way to a much needed pullback that worked off overbought technical readings.

TMUS Short-Term Chart (2017 – 2020)

Short-term chart showing the share price performance of T-Mobile US, Inc. (TMUS)
TradingView.com

The first quarter decline found support at the 2019 breakout level, reinforcing support in the $60s, while price action into June completed a cup and handle pattern. The stock broke out on Monday, posting an all-time high at $105.11, and is now consolidating at new support. The breakout suggests a measured move up to $140, or more than 35% above the currently traded price, offering excellent reward:risk because stop-loss orders can be placed relatively close to $100.

The on-balance volume (OBV) accumulation-distribution indicator has matched bullish price action since bottoming out in November 2017. It turned sharply higher in July 2019, a few months after the price breakout, and has continued to post higher highs and higher lows since that time. Even so, OBV is still positioned under the February peak and hasn't confirmed the breakout, raising the potential for a final downdraft that could offer a low risk entry near the 50-day exponential moving average (EMA) in the $90s.

The Bottom Line

T-Mobile stock has broken out of a four-month cup and handle pattern, raising the odds for impressive gains in coming quarters.

Disclosure: At the time of publication, the author held Verizon Communications in a family account but no positions in the other aforementioned securities.