T-Mobile US, Inc. (TMUS) completed its merger with Sprint Corporation on April 1, ending the long saga that started on April 29, 2018, when the hook-up was first announced. The U.S. Department of Justice (DoJ) and Federal Communications Commission (FCC) dropped their objections in 2019, but the final deal was delayed when a team of state attorneys general challenged the approval. Judge Timothy Keely rejected their allegations on April 1, finding no antitrust issues.

The merger reduces the number of big players in the cellular phone space to just three companies: T-Mobile, Verizon Communications Inc. (VZ), and AT&T Inc. (T). The rivals have whipsawed in reaction to merger catalysts since the 2018 announcement, but selling pressure looks misplaced because the new landscape will allow all the companies to increase prices at a faster pace. The final repeal of net neutrality laws would benefit the group as well, making it easier for them charge for specific service types, like streaming Netflix, Inc. (NFLX) entertainment.

TMUS Long-Term Chart (2007 – 2020)

TMUS
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T-Mobile's long-term chart is a Frankenstein's monster, pieced together through a series of mergers and acquisitions, as well as accounting changes by parent Deutsche Telecom. The stock gained ground after an initial public offering (IPO) opened in the upper $20s in April 2007, engaging in a brief rally that topped out at $40.87 in July. The subsequent decline cut through the IPO opening print in August, ahead of a breakdown that found support in the teens in November.

The stock undercut that low during the 2008 economic collapse and bounced, but the uptick failed, generating a secondary breakdown that posted an all-time low at $5.52 in January 2010. A bounce into 2011 also failed, yielding a successful retest of the deep low in June 2012. Subsequent price action completed a double bottom reversal, initiating an uptrend that stalled just below the 2007 high in 2014. The stock ground sideways into the second quarter of 2015 and broke out, but committed buyers sat on their hands until March 2016.

The trend advance booked superior gains into 2017, stalled in the upper $60s, and eased into a volatile trading range that persisted into a breakout in the first quarter of 2019. The stock hit a new high at $85.22 in July and dropped into a sloppy trading range between that resistance level and range support in the mid-$70s. It broke out once again in February 2020, posting an all-time high at $101.35, and turned south with broad benchmarks, failing the breakout.

TMUS Short-Term Outlook

The March bounce that started at the 50-month exponential moving average (EMA), .786 Fibonacci rally retracement, and rising trendline going back to 2012 has now lifted into the February breakout gap, setting up a test at new resistance. The perfect placement of the turnaround suggests the stock has hit a tradable low that could eventually yield new highs and a continued uptrend. However, it will take time to work through high volatility generated by the enormous two-month trading range.

The monthly stochastic oscillator entered a complex sell cycle from the overbought zone in December 2018 and has just reached the panel's midpoint. It's trying to cross over in a bull swing, but this level has a well-earned reputation for failed buying signals. Taken together with the 38-point first quarter trading range, shareholders should prepare for a wild ride, with plenty of whipsaws testing their resolve.

The Bottom Line

T-Mobile has completed its merger with Sprint after T-Mobile shares bounced at major support. This potent combination predicts that the stock will eventually resume its strong uptrend and post new highs in the triple digits.

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