AT&T Stock Chart: Buy or Sell After Disappointing Cash Flow Outlook?

AT&T (J) – Get the AT&T Inc. report. apparently can’t take a break. The stock fell more than 7% on Thursday after the telecom giant announced its earnings.

On the positive side, stocks have rebounded nicely from the lows when they were down 11%. Still, that’s not what the bulls were hoping for.

The company posted a second-quarter profit beat and reiterated its full-year profit forecast. AT&T even raised its mobility revenue forecast, now calling for growth of 4.5% to 5%.

So what was wrong?

Amid those forecasts, AT&T also cut its full-year free cash flow forecast by $2 billion, to about $14 billion. For a company so dependent on its cash flow and its importance to its dividend, this is not the news the bulls wanted to hear.

The sentiment is particularly bitter as the company’s spin-off, Warner Bros. Discovery (WBD) – Get the Warner Bros. report. Discovery Inc.has performed terribly since the April 11 split.

Shares of Warner Bros. Discovery have fallen more than 40% since then, but when it comes to AT&T stocks, there’s actually a silver lining on the chart. Let’s look at it.

Trading AT&T Stocks

AT&T stock daily chart.

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What does the split date – April 11 – mean in relation to AT&T stock today? It left a giant unfilled gap at $18.30.

With this morning’s drop, that gap is now closed. Not only did the stock close the gap, but it also bounced off the uptrend support (blue line).

More importantly, look at where the stock opened on April 11 and what became support after the Warner Bros. split. Discovery. This level would be $18.80 and it was an important support in April, May and June.

In other words, AT&T stock ultimately closed the gap to $18.30, recovered strong support after the split at $18.85 and is now looking for a new direction.

If the stock loses $18.80 as support, then technically speaking, the post-profit low is back in play near $18.24. Below that and the lows of $17 could be on the table.

On the upside, let’s see if stocks can recover the 200-day moving average. If he can do that, AT&T stock may start to close the gap to $20.40.

Along the way, some important areas may include the 50% to 61.8% retracement area between $19.32 and $19.57, as well as the descending 10-day moving average.

While investors are generally used to less volatility in a stock like AT&T, some traders may be reassured by the way it has traded, as it has recently shown a very technical price move.

Karen J. Nelson