AT&T (T) has been under heavy pressure over the last four weeks. The stock rebounded sharply off the Oct. 15 lows and by mid-November it was trading well above the 200-day moving average. This impressive rally was quickly turned away after T retested its October peak. The stock again failed just above $36.00, leaving behind an ominous looking double-top in its wake.
The stock held its ground in late November but opened this month with a steep drop. Heavy selling pushed the stock down below $34.00 as this week began, but the real damage didn't come until Tuesday. The stock fell nearly 4% before recovering late in the day to close with a 2.9% loss. Despite the bounce, the stock closed below its 40-week moving average for the first time since late 2011. The Oct. 15 spike low was also violated during the selloff. Heading into today, the stock remained above Tuesday's low but that level has been taken out. I expect more downside in the near term.
AT&T (T)
Source: FreeStockCharts.com
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Another push lower will put AT&T into a very low-risk buy zone. The stock's 2011 high is just below $32.00. In late January and early February, the stock was hit with a selling wave that drove the shares below this level, but the damage was well contained. The result was a major monthly double bottom, at $31.75, that preceded the powerful March rally.
I believe T is a very low-risk buy as it returns to this support zone so I will be adding to a small long position in the stock as $32.00 is violated. The stock has also dipped back into oversold territory this week. With a dividend yield of more than 5.5%, and continuing strength in the long end, T should begin to attract attention again.
At the time of publication, Morrow was long T.