Category: Communication Services

It’s been a good run for the sector.

There are two ways to work off a momentum divergence. Through corrective price action or through time.

A bullish momentum divergence at the November lows helped jumpstart a bearish to bullish trend reversal in the Communication Services sector. Now we’re eyeing another momentum divergence.

Throughout most of 2022, Communication Services was one of the worst places you could put your money. But when the sector broke down to new lows in November, momentum failed to confirm the selloff, signaling a bullish divergence. Our view on momentum divergences is that they usually lead to mean reversion rallies. Those mean reversion rallies sometimes lead to trend reversals.

The Communication Services sector reversed some of its year-to date gains, causing us to wonder: Is the group set to resume its multi-year downtrend, or is this just a digestion of the rally?

For the first time in over a year, we are forced to question whether the Communication Services sector is still in a downtrend. The group has been the unquestioned laggard on the downside since September 2021, but an impressive rally to start January has them breaking through the relative downtrend line from those 2021 highs.

The relative downtrend in Communication Services remains intact. Momentum is still in a bearish range, and prices have yet to set a higher high or challenge the downtrend line from the 2021 peak.

The relative downtrend in Communication Services remains intact. We’ve seen a nice bounce over the last few weeks, but momentum is still in a bearish range, and prices have yet to set a higher high or challenge the downtrend line from the 2021 peak.