Despite the selling pressure that has been placed on the market over the last few days, there are a few stocks that are worthy of some profit-taking as they’ve reached overbought conditions. Among them are AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ) and Altria Group Inc (NYSE:MO).
AT&T Inc. (T)
With a year-to-date return of more than 22%, it would seem like AT&T is a no-brain holding through the storm. However, the fact is that everyone has thought this way about T shares, which is why the stock has reached overbought levels.
At the same time that shares are nearing multiyear highs around $43 set in 2007, AT&T shares are flashing a short-term sell signal.
For now, T stock likely will start seeing selling pressure as investors take a few relaxing breaths and the market experiences a well-deserved dead-cat bounce (see: today). Soon enough, you should get a chance to buy AT&T shares for a little cheaper than where they stand today.
Verizon Communications Inc. (VZ)
VZ shares are in the same boat a AT&T. The stock has served as a safe dividend play during the recent spate of volatility, and the resulting rally has taken Verizon stock into clear short-term overbought territory.
Technical traders are likely to start taking profits.
Over the long-run, of course, VZ and other more domestically focused stocks are likely to see continued demand as investors look for investment options that will help to insulate them from the volatility of Europe as the Brexit situation continues to play out.
Expect buyers to come back in at the $39 level for Verizon stock given the intermediate-term consolidation that built strength at this price point from March through June.
Altria Group Inc (MO)
Another domestically focused dividend stock that has benefited as a defensive play over the last few weeks is Altria Group. MO shares are trading more than 7% higher over the past month as investors have chased dividend stocks higher on the lowered likelihood of an interest rate hike in 2016.
In addition to being overbought on a short-term basis, Altria Group is one of the few companies in the market that is also overbought on a weekly and monthly basis, putting it in rare air that is hard to hold all-time highs in.
Don’t be surprised when the risk-on trade comes back on for a few days while the dead cat bounces and Altria shares move in the opposite direction as traders lock in their gains. Not to worry — MO should find support at its 50-day trendline near $64.
