AT&T Slumping Near 7-Year Low

AT&T Inc. (T) raised its quarterly dividend by a penny in Friday's pre-market, but the news has failed to attract buying interest. The apparent apathy isn't surprising because the stock is glued to a seven-year low despite recent upgrades from Citigroup, Cowen, JP Morgan and boutique firm MoffettNathanson. This laggard behavior raises all sorts of red flags, predicting even lower prices in the coming months.

Remaining bulls hope that the investing public eventually notices Wall Street's newfound love for the perennial underperformer, allowing the stock to play catch-up with improving metrics. We won't find out if they're right until at least January because the communications giant has been an intensely bad performer in 2018, down more than 23% year to date, raising the odds for tax-selling pressure into year end.

T Long-Term Chart (1999 – 2018)

Long-term technical chart showing the performance of AT&T Inc. (T) stock 

The stock posted fabulous gains in the 1980s and 1990s after the 1982 Baby Bell breakup opened up all sorts of new growth opportunities. It posted an all-time high at $59.94 in January 1999 and sold off to the low $30s at the turn of the millennium. A 2000 breakout attempt failed, while the subsequent downturn completed the last leg of a double top pattern that broke to the downside in 2002.

Selling pressure eased in the first quarter of 2003 after the decline held support at the 1994 low in the upper teens. That marked the lowest low in the next five years, ahead of a limp recovery effort that escalated in 2006, reaching a six-year high in the lower $40s at the October 2007 top. The stock gave up those gains during the 2008 economic collapse, dropping into a successful test at the 2003 low, and bounced back above $30 in 2011.

Price action into July 2016 carved two respectable buying waves that stalled at 2007 resistance, marking the highest high in the past two years. A swift decline into the presidential election signaled the opening shot of the current downtrend, which has carved an endless series of lower highs and lower lows in 2017 and 2018. The last selling wave ended at $28.85 in October, marking the lowest low since December 2011.

T Short-Term Chart (2017 – 2018)

Short-term technical chart showing the performance of AT&T Inc. (T) stock

The decline has unfolded through a series of oversold bounces that have run into major selling pressure just above the 200-day exponential moving average (EMA). Sadly, AT&T hasn't held that price level since an April 2017 breakdown. The most recent downturn began at that level in October 2018, with a vertical decline dropping the stock into the $20s for the first time since April 2012. It has been grinding sideways across the round number $30 for the past six weeks, showing few signs of buying interest.

The on-balance volume (OBV) accumulation-distribution indicator offers a ray of hope for battered shareholders. It posted an 18-month high in March 2018 and entered a distribution wave that ended in May. Active bottom fishing since that time has generated a bullish divergence with falling price, possibly indicating that long-term selling pressure is exhausted and setting the stage for a January effect recovery wave.

However, the long-term outlook remains extremely bearish. The stock broke three-year support and the 200-month EMA in the low $30s in October, predicting that bounces will fail to gain traction above $32 to $33. The next support level on the downside lies at 2010 and 2011 range lows near $27, but a multi-decade trendline near $23 could offer a more durable bottom because it is narrowly aligned with the .786 Fibonacci retracement level of the 2008 to 2016 uptrend.

The Bottom Line

AT&T stock has failed to gain ground, despite upgrades from major investment houses. This price behavior signals a bearish divergence that could presage much lower prices in 2019.

Disclosure: The author held no positions in the aforementioned securities at the time publication.

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