The UK’s leading telecoms group BT has struggled over the last couple of weeks as fears over the Delta variant Covid strain briefly wobbled markets.
However, despite this pullback, the share price has shown investors a 38% return year to date. Furthermore, there are signs this recent decline may offer investors a buying opportunity before the next leg higher.
My colleague yesterday highlighted one metric that shows the BT share price may be trading 36.5% below fair value.
Today, I will focus on the technical backdrop that could reinforce his theory.
BT Group technical outlook
The weekly chart shows a multi-year cup and handle formation that could be brewing up something exciting for the price.
The decline of the last month becomes particularly interesting when you consider the textbook example.
As a stock forming this pattern tests old highs, it is likely to incur selling pressure from investors who previously bought at those levels; selling pressure is likely to make price consolidate with a tendency toward a downtrend trend for a period of four days to four weeks, before advancing higher. A cup and handle is considered a bullish continuation pattern and is used to identify buying opportunities.
The decline in the BT share price also tested the 50-Week moving average on Monday but was reversed. This is another encouraging sign for the bulls.
However, the formation will not be confirmed until BT Group closes above the September 207.40p high. In that event, October 2018’s 242.00p high becomes a logical target price for the bulls.
However, if the price falls below 175.00p, it would suggest the cup and handle theory is invalid and could lead to an extension lower, targeting 145.90p.