AT&T From the Top Down

In honor of Tuesday's earnings report, it's probably as good a time as any to take a good look at shares of AT&T. We'll start with the longer-term weekly chart where we can see a clearly defined uptrend line from the lows in March of 2009. One of the things I get asked a lot is how to draw uptrend lines and whether or not it is okay to have several lines to define a trend. My answer is simple: if there are multiple lines that work, draw them both. I think this is a good example of that:

We've been stuck in this sideways range for a good year and a half between around 33 and 38. This isn't very good considering what the S&P500 has done during the last 18 months. It's not surprising that when we ran the numbers, $T has a negative 0.50 correlation with S&Ps. You can't just assume that a Dow component will move in the same direction as the overall market.

Another bearish sign that I see is the divergence in momentum with each new high in price. Also notice that false breakout last spring (circled in gray). That was the catalyst to really stall the progress in this name. Looking at AT&T from a far, it appears as though this uptrend line since the beginning of the bull market is now in question.

Shorter term, AT&T is awfully messy. We can see these lows from 2012 just below the lows from 2013. So even a breakdown to new 52-week lows could still find support under 33. That makes it a tough short right here:

But to buy it doesn't make much sense either: what's the upside? I'd be an aggressive seller up near 34.50 and even more aggressive closer to 35. So to buy it here is not for me.

Now, on a relative basis it definitely looks horrible. You want to talk about a strong downtrend. Look at how this chart looks over the long-term. If you're going to be long a US Stock, is this really the one you want to own as it makes historic lows relative to the S&P500?

And finally here is AT&T relative to Verizon - also not a pretty picture. You don't need to be a expert to see the series of lower highs and lower lows. Now we have a very tight range going back to last Spring. My discipline tells me that consolidations like this tend to resolve themselves in the direction of the underlying trend. So I see us probably breaking down from here.

Not every single name has to be a buy or a sell. A no-touch is okay too. For right now, I don't see a reason to be involved with this name, long or short.

Tags: $T $SPY $VZ