Apple and Amazon shares have been great performers for years, while good, old AT&T hasn’t done much of anything.
But under one scenario, AT&T’s T stock has the potential to outperform Apple AAPL and Amazon AMZN. Let’s explore this issue with the help of a chart.
Please click here for an annotated chart of AT&T.
Note the following:
• It’s a monthly chart. In this case the monthly chart is appropriate as the objective is a long-term position.
• The chart shows that the stock of AT&T jumped on activist investor Elliott Management taking a $3.2 billion stake in AT&T.
• Elliott Management says AT&T stock could be worth at least $60 per share by the end of 2021.
• Coincidently, the chart also shows the long-term target of $60.
• Elliott’s $60 target is based on the sale of non-core assets, an increase in strategic focus, an improvement in operational efficiency, better capital allocation and better governance.
• Compare AT&T’s stock to S&P 500 ETF SPY on a chart and you will readily see that AT&T has been underperforming. Underperforming stocks often revert to the mean.
• The chart shows the first target is around $44. In due course, we will provide to our subscribers more precise target zones.
• The chart shows AT&T’s stock has traced higher lows.
• Relative strength index (RSI) on the chart shows that the stock is overbought and may pull back.
• Although the Elliott news caused an increase in volume, the stock closed near the low of the day when the news was released. This is a negative. This indicates a pullback may occur in the near future.
• Overall, the chart shows that volume is not high. This also indicates that a pullback may occur in the near future.
Over-owned and under-owned
A key point investors ought not miss is that AT&T’s stock is under-owned. In contrast, popular stocks such as Facebook FB, Netflix NFLX and AMD AMD are over-owned. Of course, Amazon and Apple are very over-owned.
When a stock is very over-owned, everybody who is going to buy it has already bought it. On negative news, sellers appear but there are no buyers. This can cause a major drop in a stock totally disproportionate to the news. Our long-time readers are already familiar that we have used this information and logic numerous times to give sell signals in popular stocks right at the top….Read more at MarketWatch.
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