AT&T (T) shares were raised to a buy recommendation by Citigroup (C) here on Tuesday with a $17 price target. The price target is not impressive to start with, but after T's long decline the past four years more base building is needed, in my opinion.
Let's review the charts of the telecom giant, which I last looked at on July 26, so I can show you what I mean.
In this daily bar chart of T, below, I see the chart of a stock that continues to struggle. Prices are still in a downward trend and trade below the declining 50-day moving average line and below the declining 200-day line.
The trading volume spiked in July as prices plunged to a new low but the follow-on trading saw volume decline. This pattern suggests that discouraged longs were sellers and investors with vision have not yet approached. The daily On-Balance-Volume (OBV) line remains in a decline from April.
The Moving Average Convergence Divergence (MACD) oscillator is moving up but it remains well below the zero line.
In this weekly Japanese candlestick chart of T, below, I can see some recent spinning top formations. These patterns could be part of a bottom reversal pattern or they could be considered just patterns that indicate a balance between buyers and sellers.
Trading volume is weak and the OBV line is neutral. The MACD oscillator is bearish but shows some narrowing toward a possible cover shorts buy signal.
In this daily Point and Figure chart of T, below, I can see a downside price target projected in the $12-$11 area.
In this weekly Point and Figure chart of T, below, I see the same price target as the daily chart above.
Bottom-line strategy: I have a lot of respect for experienced fundamental analysts -- they know a great deal about a company and its industry. Unfortunately they rarely look at the chart of the stock (I know this from years of personal experience at Citigroup and Morgan Stanley).
For me, T needs to form a major base pattern after its long decline.
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