A sell-side fundamental analyst upgraded his company's recommendation on AT&T (T) to "Overweight" Thursday, so this is a good time to take another look at the charts and indicators.
In our October 12 review, we wrote that "I don't pretend to know why investors are shunning T but it is clearly in a serious downtrend and traders should not anticipate support to develop based ancient charts. We had a negative view of things on July 22, and we would continue standing on the sidelines."
Let's see if anything has improved.
In this updated daily bar chart of T, below, we can see that prices have slipped lower since our October 12 review. T is still trading below the bearish 50-day moving average line and the bearish 200-day line. The On-Balance-Volume (OBV) line is still in a decline suggesting that sellers of T are being more aggressive with heavier trading volume being transacted on days when T closes lower. The Moving Average Convergence Divergence (MACD) oscillator is still bearish.
In this weekly Japanese candlestick chart of T, below, we went back five years to give some perspective. What really strikes me about this chart is all the red (bearish) candles. Prices are in a downtrend and well below the declining 40-week moving average line. The weekly OBV line and the MACD oscillator remain bearish.
In this long-term weekly close only line chart of T, below, we can see that prices are back to the area last seen in 2002/2003. Some analysts may be considering this area as long-term support but for me I only consider it psychological support as anyone who may have bought back in 2002 has long since forgotten that level and moved on.
In this daily Point and Figure chart of T, below, we can see a potential downside price target in the $14 area. A trade at $21 will be a new low for the move down and could precipitate further declines.
Bottom line strategy: Fundamental analysts can use words like "valuation" but not technical analysts. We like to look at and talk about trends, especially uptrends. Maybe T has reached an attractive valuation. Maybe it can start a bottoming process. Traders who like to combine fundamentals and technicals could probe the long side of T at current levels BUT a trade at $21 would weaken the picture.
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