A dangerous bearish pattern whose formation has yet to be confirmed is clouding Telefónica’s stock market outlook.
The Spanish multinational has now definitively moved away from the psychological level of 4 euros after the arrival of the omicron variant in the market and is already looking at very sensitive areas.
The downward pressure has already gained in decibels even before the existence of the new strain of coronavirus was known.
It was all a matter of the Government moving away the takeover sirens on Telefónica, by shielding the company for a further twelve months after KKR’s operation on Telecom Italia.
Considered by analysts as the next great catalyst in the telecommunications sector, sector consolidation is no longer an ally for the operator, which also has to face the growing competitive pressure in the local market.
In this way, the titles of Telefónica they could be brewing a head and shoulders formation, a technical pattern with serious bearish implications. But everything is to be confirmed.
Head and shoulders training in sight at Telefónica
With the caution that must always be exercised with this type of technical structures, the truth is that Telefónica It would confirm this greater pattern if it loses the level of 3.5 euros, as explained by the head of finance.com analysis, Josep Codina.
From the highs of the year, the potential decline presented by this figure would leave Telefónica’s securities at the level of 2.8 euros.
It would mean a 23 percent decline for the multinational from current listing levels.
In the opinion of Jose Luis Herrera, an analyst at Banco de Invesión Global (BIG), “the price of Telefonica is getting closer and closer”, although he is not clear about the possible head and shoulders pattern and believes, in any case, that it would be unorthodox.
In what this expert does agree is that the operator has a support around 3.45-3.5 euros, which are the levels of July and November.
“It is very important that it does not lose the level of 3.45 euros at the weekly closing,” said Herrera. For Diego morin, analyst and IG, the key support area for Telefónica is a little higher, at 3.6 euros.
Bullish momentum options
The area of 3.6 euros in which Telefónica traded this Friday is the level against which the price has hit in recent months, both in July and in November.
If you lose them, the IG expert thinks, like Herrera, that the next support would be 3.45 euros.
To seek an upward momentum, “it would be interesting to close above the level of 3.72 euros, a situation that would be worth testing the area of 4.25 euros,” he said. Morin.
But first, “the value would have to consolidate the aforementioned levels so that we can rise to it,” the IG expert stressed.
In the opinion of Herrera, the rebound options not only go through holding the 3.45 euros. In addition, it is necessary to leave the area of 4.15-4.2 euros behind, in order to be able to attack the important resistance of 4.65-4.8 euros and be able to have more ambitious objectives.
The weekly closing will be the first litmus test for Telefónica. Maintaining the 3.45-3.5 euros, there would be no confirmation of the head and shoulders formation.
Doubts weigh on the price
The latest streak of drops has meant that Telefónica lower your annual earnings balance to 12 percent. The price is now far from the annual highs of 4.3 euros in mid-August.
In an extensive report, INVERSIÓN magazine has already warned about the doubts that persist in the Spanish multinational, whose evolution in the stock market is giving the reason to this thesis.
The market is concerned about the intense competition in the domestic market. “We are cautious about the medium-term outlook as high prices in the Spanish market will test efforts to calm competition,” said experts from Bloomberg Intelligence.
In addition, in just over two weeks the results of the awarding of LaLiga’s audiovisual rights will be known.
For Telefónica it is a key event, since the market believes it is very possible that the operator will lose exclusivity, or at least have to share it with platforms such as DAZN o Amazon Prime.
Also on the horizon is Telefónica’s decision to put its fiber division on the market, an operation that generated many doubts in the market. Neither analysts nor investment banks see clear the urgency of this operation.