AT&T (T) has been in recovery mode since trading as low as $26.80 on Dec. 26. The stock rallied to its 2019 high of $38.75 on Sept. 11, where profits could have been taken at its annual risky level for 2019 at $38.53. My call is to sell strength to $38.53 or on a price gap below its semiannual and monthly pivots at $36.58 and $36.38, which held on Wednesday morning, Sept. 18. The downside risk is to the 200-day simple moving average at $31.94 and its quarterly value level at $30.34. The weekly chart shows that the stock is an “inflating parabolic bubble” formation, which indicates downside risk of 10% to 20% over the next three to five weeks.
AT&T has positive near-term statistics! The stock closed Tues., Sept. 17, at $37.16, up 30.2% year to date and up a bull market 38.7% since trading as low as $26.80 on Dec. 26. The stock is just 4.1% below its 2019 intraday high of $38.75 set on Sept. 11. Longer term, the stock is consolidating a huge bear market decline of 68% from its Oct. 2000 high of $59.00 and its March 2003 low of $18.85. The stock is fundamentally cheap with a P/E of 10.80 with a dividend yield of 5.38%.
Wall Street is touting three reasons to buy AT&T ahead of its third-quarter earnings to be released on Oct. 23. Their opinion is that the telecommunications giant offers premium media and entertainment content, Pay-TV and traditional phone services which makes the stock a bet on a global economic recovery. The bulls feel that the stock will survive the trade war with China and the cooling housing market to which is products are sold. AT&T investors are betting that fans of Apple (AAPL) products will be lining up at Apple stores to buy the newest iPhones even though they are not usable in the coming G5 revolution.
Here’s TheStreet.com coverage of AT&T as CEO Randall Stephenson addressed activist pressure at the Goldman Sachs telecom and media conference on Tuesday, Sept. 17.
AT&T has been facing a class-action lawsuit that alleges that it inflated the subscriber growth for its Direct TV Now streaming service. This potentially false activity may have accounted for much of the recent share price strength.
This morning Wall Street bankers have been lining up to submit various proposals to AT&T to sell off its troubled DirecTV unit, including one involving Dish Network as the potential suitor.
Courtesy of Refinitiv XENITH
The daily chart for AT&T shows the formation of a “golden cross” on May 21 when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices lie ahead. Under this buy signal, investors could have bought the stock at its 200-day SMA at $31.20 on May 31. This signal tracked the stock to its 2019 high of $38.75 set on Sept. 11. The annual risky level has been in play all year long and was finally tested on Sept. 11. Its semiannual pivot for the second half of 2019 is $36.58 with its monthly pivot for September at $36.38. It’s quarterly value level lags at $30.34. The stock is above its 50-day and 200-day SMAs at $34.76 and $31.94, respectively.
The Weekly Chart for AT&T
Courtesy of Refinitiv XENITH
The weekly chart for AT&T is positive but overbought with the stock above its five-week modified moving average of $35.59. The stock has been above its 200-week simple moving average or “reversion to the mean” at $36.07 since the week of Sept. 6. The 12x3x3 weekly slow stochastic reading is projected to slip to 90.12 this week down from 92.36 on Sept. 13. The reading above 90.00 puts the stock in an “inflating parabolic bubble” and bubbles almost always pop with declines of 10% to 20%, or more over the next three to five weeks.
Trading Strategy: Sell strength to its annual risky level at $38.54 or on a sell stop on a close below its semiannual and monthly pivots at $36.58 and $36.38, respectively. Buy weakness to its quarterly value level at $30.34.