Cloud theory implies rally at telecom co

  BEIJING, Jan. 18 -- China Mobile Ltd, the world's biggest telecom operator, may rally 13 percent after breaking out of a so-called "ichimoku cloud" this week, according to technical analysis by BTIG Hong Kong Ltd.

  Christian Kielland, head of trading at BTIG, said China Mobile will rally toward the HK$90 level after analyzing the stock using the Japanese method of "ichimoku kinko", which looks at wave patterns and repeating trends. The stock closed at HK$78.9 last week.

  Technical analysts make predictions based on patterns in price charts and market data. Ichimoku kinko, a strategy developed by a Japanese journalist before World War II, translates as "one glance equilibrium chart" because of the cloud-like patterns formed by trend lines that make it easy to understand at a glance.

  "China Mobile breaking out of the ichimoku cloud is a strong bull signal," said Kielland. "This stock could be one of the best performers in Hong Kong this year."

  The last time China Mobile broke above the ichimoku cloud was on July 27, 2009, after which the shares rallied 15 percent to peak at an intraday high of HK$92.25 on Aug 10. It has fallen 14 percent since then through to last week's close.

  Psychological Resistance

   It's "reasonable" to expect China Mobile to go back to HK$90, Kielland said. "It may even go to HK$100, though there is a lot of psychological resistance before that."

   An ichimoku chart analyzes the midpoints of historic highs and   lows. The conversion line is the same calculation over the past nine trading days. The baseline is the sum of the highest high and the lowest low over the past 26 trading days. A lagging span is the most recent closing price plotted 26 days behind the current level.

    Kielland said positive news for China Mobile will also support the rally. Its high-speed, 3G mobile service is beginning to show good results and the stock also offers a high dividend yield, he said. China Mobile's yield of 3.5 percent is more than smaller rival China Unicom Hong Kong Ltd's 2.3 percent. China Mobile's recent gains may also be attributed to the stock being relatively cheap compared with its peers, Kielland said.