The shares of telecommunications provider AT&T (T) are underperforming the broader market, down 24% year-to-date, cautions Bernie Schaeffer, options expert and editor of Schaeffer's Investment Research.
In addition, shares failed to stay above the -20% year-to-date level in June, and the security’s 40-day and 80-day moving averages have recently come in as overhead resistance. With these layers of resistance in place, we are recommending a new short position on T.
Digging deeper, analysts are split toward the equity coming into today. Of the 17 in coverage, 10 maintain a tepid “hold” or worse rating, while the remaining seven carry a “buy” or better.
In other words, AT&T stock could be overdue for a fresh round of downgrades soon, which would pressure shares even lower.
Meanwhile, short interest has been declining since mid-January, and is down 5.25% in the last two reporting periods. The 114.60 million shares sold short make up 1.6% of the stock’s available float, or exactly three days’ worth of pent-up buying power. Nonetheless, it has not supported shares.
In the options pits, options traders are more optimistic. The stock sports a 50-day call/put volume ratio of 2.20 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 82nd percentile of its annual range.
In other words, this underscores a healthier-than-usual appetite for calls of late. Traders should target a move down to $26, with a stop above $31.
