Chart of the Day

American Tower (AMT, NYSE)

Thoughts on 5G

As the next big thing in the journey of digital transformation, 5G will have an enormous impact on mankind. It will undoubtedly disrupt the way we live and work and has the potential to completely revolutionize developing economies. This is why I think it will offer some incredible investment opportunities in the coming five years.

5G is next generation wireless network technology that is expected to change the way people live and work. It will be much faster and able to handle many more connected devices than the existing technology (4G LTE networks), enhancements that will enable a wave of new technological products and services, further advancing the reality that every industry is a technology industry now. 5G networks began rolling out in the United States and around the world in 2018 and are still in their early days, but the potential is huge. It will change the world.

The 5G revolution has begun and the explosion of connected devices, such as mobile phones, televisions, security systems, and speakers, among others, is only going to intensify.

The associated investment possibilities include core carrier grade networking equipment including cellular antennas and routers, mobile network operators, satellite-based communications,enhanced mobile broadband chips, new radio technology, wireless network test and optimization equipment, cloud computing equipment, software defined networking or network functions virtualization, fiber optic cables, or cell tower and/or data center real estate investment trusts.

Today’s chart(s) focuses on the latter category, a 5G cell tower real estate trust.

 

American Tower (AMT, NYSE)

I was studying Crown Castle International Inc. (CCI, NYSE), another 5G cell tower Real Estate Trust. Our real estate partners (Hazelview Inc.) believe that CCI is entering a super growth phase and is high quality company. Then a client who works in the communications sector asked me about American Tower. Like CCI,  the AMT chart has some problems.

Using our trend following and relative strength process means we don’t go looking for the trade. The trade has to come to us. What is the chart of AMT telling us?

On Chart 1. below, a three year weekly chart, we can see a couple of very important things.

– Over the last five weeks, the internal momentum of the stock has turned up as shown in the Purchase Price Oscillator (PPO) which has stopped falling.

– At the same time, the weekly candles have been closing in the upper half of the weekly range, for most of the last five weeks. This speaks to the momentum but is shown in the behaviour of the candles since the end of December.

-And that action speaks to the accumulation patterns on the stock, which we can see has actually not fallen off during the entire pullback from $265 to $222. However, looking at the relative performance line (bottom pane) we see that AMT has been underperforming the S&P500 (SPX) for nine months now. A stock cannot outperform all the time, but when underperformance lasts for longer than 5 – 6 months, there is often a problem that we learn about later. So AMT’s long term chart, has some promise, but needs to change the trend of underperformance before we can consider it.

 

Chart 1.

 

What we see in Chart 2. , the one year daily chart is a little more encouraging. The red dashed line shows a finer (daily) view of the support AMT has had at about $215 over the last six or so weeks. During this time both the RSI and PPO have risen, showing a positive divergence in the internal momentum of the stock. It looks like it wants to go higher.

Also, the short 20 day and medium 61 day version of the Chaiken Money Flow measures money and volume flow which is currently showing a general buying bias.

 

Bottom Line: 

It looks like this stock wants to stop its decline and turn around and go higher. Because it has underperformed during the entire up move since the March lows we are going to need to see some follow through on the recent positive action before buying it. We want to see an improvement in the moving averages with the 21 Day Moving Average (DMA) moving above the 50 DMA and preferably 150 DMA, and the 150 DMA should turn upwards. Ideally, the stock should be above the 150 DMA but it’s possible to buy before that if everything else lines up.

This is what we mean by waiting for the position to come to us. I’ll pay a higher price for it to be sure, but the odds of making money will then be more clearly in our favor.

 

 Chart 2.

 

Please give us a call if you have any questions.

 

Peter

 

 

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