AT&T (T) - Get Report beat earnings-per-share estimates Monday and traded to a new 2019 high. On Oct. 24, the stock held its semiannual pivot at $36.58 which was the low end of the buy zone. Monday it traded above its annual pivot at $38.53, which had been the high end of the zone. The stock has been above its technical "reversion to the mean" which is its 200-week simple moving average at $36.19 since the week of Sept. 6 favoring higher prices. My call is to buy the stock on weakness at its annual pivot at $38.53 and add to positions on weakness to its semiannual pivot at $36.58.
AT&T missed on revenue, but investors cheered the better-than-expected rise in new monthly subscribers to its wireless smart phone network which added 101,000 new customers. Here are the details as presented by TheStreet.
The stock closed last week at $36.91 up 29.3% year to date and in bull market territory 37.7% above its Dec. 26 low of $26.80. Longer term the stock is consolidating a bear market decline of 38% from its July 2016 high of $43.89 to its Dec. 26 low.
AT&T is fundamentally cheap positive with a P/E multiple of 10.49 with a dividend yield of 5.54%.
The Daily Chart for AT&T
Courtesy of Refinitiv XENITH
The daily chart shows AT&T above of a "golden cross" since May 21 when the 50-day simple moving average rose above the 200-day simple moving average indicating that higher prices lie ahead. Under this buy signal investors could have bought the stock at its 200-day SMA at $31.20 on May 31. This signal tracked the stock to its annual risky level at $38.53 on Sep. 11. This annual pivot has been a magnet with a breakout above the level this morning Oct. 28. The stock's semiannual pivot for the second half of 2019 at $36.58 was a magnet between Sep. 18 and Oct. 24 as buying opportunities. The stock is above its 50-day and 200-day SMAs at $36.94 and $33.06, respectively. The fourth quarter value level is $29.57.
The Weekly Chart for AT&T
Courtesy of Refinitiv XENITH
The weekly chart for AT&T is positive but overbought with the stock above its five-week modified moving average of $37.33. The stock has been above its 200-week simple moving average or "reversion to the mean" at $36.19 since the week of Sept. 6. The 12x3x3 weekly slow stochastic reading is projected to end this week at 85.35 well above the overbought threshold of 80.00.
The horizontal lines are the Fibonacci Retracement levels of the bear market decline from the July 2016 high of $43.89 to the Dec. 26 low of $26.80. In 2019 the stock climbed above the 23.6% retracement at $30.84 during the week of June 7, then above the 38.2% retracement at $33.33 during the week of Aug. 9, then above the 50% retracement at $35.54 during the week of Sep. 6 and then the 61.8% retracement at $37.36 as this week begins.
Trading Strategy: Buy weakness to the annual and semiannual pivots at $38.53 and $36.58, respectively. Employ a sell stop given a weekly close below the 200-week simple moving average at $36.19.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter so the close on Sept. 30 established the level for the fourth quarter. The close on Sept. 30 also established the monthly level for October as monthly levels change at the end of each month.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.
To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
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Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.