As much as we all want the telecom sector to be a technology play it is still basically a utility play. The difference is growth sector versus defensive sector. The predictable revenue streams these companies generate make them more defensive than growth oriented. There are times when they roll out new products and services where revenue growth accelerates, but they still are priced on cash flow. The chart below is (NYSE: IYZ [1]), iShares Telecommunications ETF. It is hard to ignore the long eight month trading range the sector has been in until the recent break higher. What changed? Why the sudden interest in the Telecom? Essentially rotation of money by investors to what is perceived as less risk in the defensive sectors.

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We have tracked this sector from our scan list with the bounce off the bottom of the range, to the watch list on the momentum shift with the move through $18.25  to the play list. Cross of the 20 day back above the 50 day moving average was positive and as was the break above the top of the trading range on accelerating volume. The fund closed at $19.67 above the top trendline of the uptrending channel, (yellow) opening the way for a move back to the September 2008 high. We remain positive on the sector and look for a gradual move towards the target shown on the chart over the next 9-18 months (intermediate term).

As with any investment the key is a defined strategy and entry point, risk management with a define stop, and focus with a define target. Entry, Exit, Target on every investment - before you invest.

Listen here to Jim review this play on todays radio interview. [3]