In recent years, when the market appears to be in a bullish phase, investors flock to growth stocks that promise capital appreciation. In a more defensive environment, they instead gravitate towards stocks with low volatility and high dividends. AT&T (T)’s recent moves suggest that this communications stock can offer a powerful combination of strong price performance and meaningful dividends. While the S&P 500 bottomed in October 2023, T actually bottomed in the summer of that year. By October, AT&T had hit a series of higher lows, confirming a shift to a bullish trend. By the end of 2023, T finally reached $17.50, marking the 61.8% Fib retracement of the downtrend from the beginning of the year. Over the next six months, this communications leader essentially bounced up and down between the support of the 38.2% retracement around $16 and the resistance of the 61.8% retracement level of $17.50. The April 2024 low was also just above the 200-day moving average, and T quickly rallied back up, retesting the same resistance level as the previous uptrend. However, over the past six weeks, AT&T has finally broken out of this consolidation phase, reaching just above $18 in early June. The price then dropped back down to test the breakout level, which is common when a stock finally breaks out of an established base. Now that the consolidation phase is behind us, we are likely to see AT&T retest its early 2023 high around $20. Using Trendlines How can we confirm this new uptrend and manage potential downside risk if the trend begins to weaken? Here, we have created a simple trendline analysis, with a green trendline tracking a major low beginning in July 2023. This trendline is currently at $16.70, roughly the same as the current level of the 200-day moving average. As an indicator of the long-term trend, we will assume that price movements above this trendline are still within the bull market.I also drew a pink short-term trend line lining up the price lows of April, May, and June. A consistent short-term uptrend is more likely to stay above this trend line because uptrends are formed by patterns of higher highs and lower lows. A break below this short-term trend line calls into question the sustainability of the uptrend after the recent breakout. As a trend follower, I am always on the lookout for new breakouts that can lead to a consistent and highly profitable uptrend. And when I spot a surge in a high-dividend stock like AT&T, I’m reminded that value stocks can offer a powerful combination of strong price performance and a healthy income component. -David Keller, CMT marketmisbehavior.com Disclosures: (None) All opinions expressed by CNBC Pro contributors are solely the contributors’ own and do not necessarily reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliated companies, and may have been previously distributed by the contributor on television, radio, the Internet, or other mediums. The content above is subject to our Terms of Use and Privacy Policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect any individual’s unique circumstances. The content above may not be suitable for your particular situation. You should strongly consider seeking the advice of your own financial or investment advisor before making any financial decisions. Click here for the full disclaimer.
