Why AT&T Is Far From a Safe Investment

If not now, when? It’s a question many AT&T (NYSE:T) stock holders may be rightfully asking themselves. Let’s check in with what’s happening off and on the price chart, then offer a risk-adjusted determination aligned with those findings.

a photo of the AT&T office building
Source: Roman Tiraspolsky / Shutterstock.com

It has to be frustrating these days to be a AT&T shareholder. But time heals all wounds, right? Not exactly. Sure, there’s been reliable income. But even for fabled widows and orphans happy to collect today’s hefty 7.4% dividend in T stock, the shares have been a time-tested disappointment.

Since the low of the 2008-2009 financial crisis the S&P 500 has gained more roughly 750%. At the same time, T stock has vastly underperformed with its gain of about 167% or about one-fifth the broad-based, large-cap index.

Challenges for T Stock

And things have kinda sorta grown even more challenging in 2021 for AT&T.

Despite a market that’s aggressively rotated into cyclical value stocks this year to the further delight of indexers celebrating double-digit returns and all-time-highs, shares of T have looked like the late Rodney Dangerfield offering its investors a “no respect” performance of about 3%.

So, what gives? Well there is uncertainty which the market has been said to abhor.

And make no mistake T’s complex $43 billion deal to break itself up and “unlock value” embedded in its ill-fated media acquisition of WarnerMedia from five years ago has sure elements of ambiguity. Future dividends, approval and timing are all certain factors in today’s T stock.

Optimistically though, what’s the saying about markets climbing a wall a worry?

Couldn’t T’s shareholders reasonably muster a call to arms and channel their collective worries in a productive way? If we’re to believe in the forward pricing capabilities of T stock’s monthly price chart, based on today’s evidence that appears increasingly unlikely.

Monthly Price Chart

AT&T (T) long-term up channel at risk of failure

Source: Charts by TradingView

Technically and as the illustrated monthly view of T reveals, underperformance in shares hasn’t yet failed a long-standing uptrend channel. But the days of pattern support holding appear numbered.

Today, T stock sits narrowly below May’s bearish engulfing lower-high candlestick. In conjunction with stochastics putting together a similarly ominous pattern, the observation is trend support that’s about 8% beneath current prices is likely to fail.

A full-blown failure of channel support is expected to force a challenge of AT&T’s pandemic-related low and 50% retracement level dating back to the low of the financial crisis. That’s not the worst of it though, or rather what we think might happen in T stock.

As the saying goes, if I were to successfully pick one bottom in T stock, a challenge of 2000’s all-time-high and 62% Fibonacci level near $20.50 to $21 has our attention.

Bottom Line on T Stock

Bottom-line, I wouldn’t offer T stock as a buy to would-be investors.

And for widows and orphans or other existing shareholders of AT&T, I’d warn against being dismissive of T’s weakness. Have a firm exit strategy planned or a preemptive line in-the-sand in place like a married put or collar strategy.

On the date of publication, Chris Tyler does not hold (either directly or indirectly) positions in any securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

Article printed from InvestorPlace Media, https://investorplace.com/2021/08/t-stock-why-att-is-far-from-a-safe-investment/.

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