AT&T ready to for the next big jump? Dear TradingView-Community,
today I want to share the first investment idea and I hope it will help you making the right decisions or bring a new perspective to your analysis.
I really would like you to ask for feedback, that I can also learn from different views to become better over time. Thanks a lot for your time and I really hope it is not wasted, but for your benefit.
As you can see on the chart, it is a really long cycle of the AT&T stock performance. As many communication stocks at that time AT&T hit its all-time high shortly before the dot-com bubble reached its biggest volume. AT&T have never seen this price since. Instead over the years there were several up and downs, but all had one thing in common >> every high and low stayed within a triangle (purple lines) and the volatility went down more and more.
In October 2021 after presenting Q3 results, the stock price went to free fall and left the triangle to the lower end. But the downturn haven't stopped there, also the last significant support zone at the 23.6% Fibonacci retracement - red line and active since 2005 - couldn't stop the sell off. Instead the chart went down almost until the last significant low from both - end of the dot-com correction (2002-2003) and end of the financial crisis (end of 2008-2009) (red bubbles).
Now let's take a closer look to the indicators, to find out if this also is a similar extreme reaction of the market as it was twice in the last decade.
1. RSI - Relative Strength Index
As you can see in the picture only 4 times since 2000 we could see a oversold situation in the weekly RSI chart until today. It is relatively easy to interpret the first 3 oversold situation because it was always the end of a broader market correction (dot-com, financial crisis, Covid 1st wave). Therefore it was also pretty easy to predict that the oversold situation will be corrected by increasing stock prices after the fear went out of market and the optimisim took place.
But what about the current situation?
We have an even more oversold situation, in fact we reached a new all-time low at 16.46. It would be very easy to argue that this is a perfect moment to buy stocks as much as possible, because this oversold situation will be cleared for sure very soon. But...
In my opinion there are several obstacles on the way and it is not that clear that a higher RSI also comes along with a higher stock price.
1. Currently we don't have had a broader market event that explains the downturn of this stock.
2. The competitor situation has changed dramatically over the last decade. (rise of T-Mobile US and recently the rollout of Tesla's StarLink project.
3. The liability situation becomes worse dramatically over the last 5 years with acquisitions of DirecTV and TimeWarner.
4. Both really large acquisitions are already on the way to separate again from AT&T in new corporations, but for a far lower value than purchased before.
5. The necessity of investing into 5G and fiber optic infrastructure to fight the competitors.
6. The latest spin-off announcement and the merger of HBO and Discovery also leads to dividend cuts for the first time since 50 years.
7. Technically the bearish cross of the triangle is a massive sell signal, but this is already happen and the price dropped already 20% since then.
Nevertheless, I need to point out that all above arguments also have some positive counterparts + we need to differentiate between a long-term investment based on value investment strategies and an short to mediate technical based investment.
So let's find out the positive things about the current situation and the nearer future:
1. Technically we are at an extreme low point when it comes to fib-retracement and RSI - that can lead to a turnaround with a short-term potential until $24.75 (23.6% Fib-retracement) or even $29.34 (38.2% Fib and connection to the triangle.
2. The merger of HBO-Discovery leads to a lot of additional stocks from the new corporation (70% of the AT&T stocks when you hold your stocks until the merger went through (approx. mid 2022). As you can see after several spin-off of different companies (e.g. Mercedes-Benz AG split from Mercedes-Benz Truck and Buses) the sum of both stocks are very often more worth than the stock before the spin-off. Means even when the AT&T stock price is not tending upwards, the spin-off and merger next year brings lots of potential.
3. The Spin-off leads to a significant liability reduction for the AT&T stock and that leads to a better value for the whole company.
4. The new merger is one of the market entertainment leader and with its digital and subscription growth strategy as well as its plans to expand to Europe, the best position in sport documentation and the strong brands will be a great base for expansion.
5. The reduced dividend kicks out dividend investors, but also leads to more free cash-flow to speed up the extension of 5G and fiber network.
6. The separation from the media section leads to more focus on the core business and allows to slimline the customer approach what also will safe operational costs.
7. AT&T is still a strong brand and one of the biggest communication companies in the world. It serves not just the US but the most countries of the world on all continents. Especially in raising Latin America AT&T is leader in costumer experience and working environment. A great foundation for further growth. Also the connection to the US government and especially into the emergency and health sector is a Garant for stable returns.
What I am now looking for to find a safe trade-in point with a W/L ratio of at least 2/1:
1. MACD weekly
When the blue line is crossing the red line again upwards that is a clear sign of strength and very bullish to interpret. Especially on the weekly basis. To trade-in earlier and have both - more potential and risk - you can use the daily basis instead. But the risk of a false signal is slightly higher.
2. OBV weekly
OBV stands for On-Balance-Volume and symbolize the activity of "smart money". Means a new high in OBV symbols massive institutional activities and could be interpreted that there is a lot of big money in the stock. On the other side new lows symbol the complete opposite. As you can see in the chart above the idea is to figure out new extreme points and use them as an investment chance.
In my opinion, we currently see a big uncertainty from institutions about the plans AT&T is planning to go. Or more likely because of the uncertainty the big money went out of the stock to observe the ongoing events and the next steps of the company from the side lane.
This brings me to think about against the main stream and feels a lot like over fearing. For me a good signal to get in, because as soon as the smart money comes back, the stock price is likely already jump by 10% or more.
3. CMV weekly
The Chaikin-Money-Flow stands for buying pressure when positive and for selling pressure when negative. As you find in the Chart, very often a new low of the CMV leads to a massive return reaction in the chart price. Therefore I am thinking again with this new all time low, the technical pressure to the upside is already in the making and could lead to a new buying period over the next couple of month.
What do you think about my interpretation on AT&T? Is it a buy, a hold or still a stock to short? I am already excited about your additional indicators that had work for you and what this indicators may tell about the next move of the AT&T stock.
Please also feel free to comment critic on my interpretation, but it would be great, when you also add some value how to do better in future.
Again thank you very much for your time and if this was value for you, you are always welcome to donate. That helps me to stay motivated in sharing my analysis.
Best wishes and maximum profit for all of you.
Daniel from EcoFinLife
>>> When all passengers in a boat are leaning to much over port it's time to go to starboard. Earlier than later the others will follow. <<<
