While all stocks have been volatile this year, the telecommunications stocks have been particularly erratic. After a very impressive 2004, it really looked like this group was going to pull out of a major slump. But as soon as 2005 rolled around, these companies fell back under the 200 day line, and the 2004 support line, which set up a pretty big slide. Now, though, the telecom stocks are back on track. It's not likely that these stocks will be any more stable than they were over the last several months, but the overall momentum does indeed appear to be to the upside again.

First, a quick review of where the index has been. Since hitting a bottom in 2003, the Dow Jones Telecom Sector Index (DJUSTL) found a bullish trading range, moving from as low as 88 to as high 138 (in December of 2004). As the weekly chart shows, it was a wild ride, but the 56% gain from the low to that high was impressive. Along the way, the boundaries of that trading range were pretty well defined (see the red lines).  When that support level was broken in early 2005 at the same time the index fell under the 200 day average (green), it was clear that the buying interest had weakened. After falling all the way back to 122, the decline was finally halted. And since then, the telecom index managed to climb back above the 200 day moving average. That's a key bullish signal. See the weekly chart below, then read on for a detailed look at the daily chart.

Dow Jones Telecom Sector Index (DJUSTL) - Weekly

On the daily chart, a 50 day moving average has been added (purple) to illustrate the need for timing this move. The 50 day average is particularly important, as it has been support and resistance several times this year. We saw the index hit this average three times between March and May. Finally in March it was able to hurdle it. The 50 day line was retested as support in early July, and it provided a springboard for the index to jump back above the 200 day average for the third time in three weeks. As of now, the Dow Jones Telecom Index has found its way above the 200 day line for the fourth time, confirming that the buyers are serious about owning these stocks, as they keep buying on each dip.

Dow Jones Telecom Sector Index (DJUSTL) - Daily

As for the timing of this potential upside move, a lot depends on the next retest of the 50 day line. It's currently at 128.76, and just a point under the 200 day average. The bullish momentum has been tapering off the last month, so there will need to be one more good pullback to the 128 area to really unchain these stocks from the anxious investors who are keeping things mostly range-bound right now. A bounce off of the 50 day line will most likely result in another cross above the 200 day line, which should be enough to jump start another big move higher.

Targets on this move, once the 50 day line is retested, are at the 150 level. That's a big move, and could take weeks, if not months, to be achieved. The bullish bias is negated with any close under the 50 day average.

The Telecom HOLDRs (TTH) are a liquid form of this sector. Qualcomm (QCOM), SBC Communications (SBC), Nextel (NXTL), and Alltel (AT) are some of the major names in this sector.

Price Headley is the founder and chief analyst of BigTrends.com.