Oversold Stock of the Day: AT&T (T)
Shares of telecom company AT&T (T) have soured in recent sessions. Shares now trade at their lowest level since May in the low $27 range. Unsurprisingly, this kind of move lower has created oversold conditions in shares.
The company’s RSI, or relative strength index, is closing in on 30. And shares have long been trading under their 200-day moving average, as well as the 50-day moving average. Traders are betting on trouble, most likely when the company reports earnings on October 22nd.
However, thanks to that drop, the company trades at its most attractive price to sales and book value in years. And the company may be debt-heavy, but AT&T has worked to pay off debt early and restructure debt at lower interest rates this year, which frees up cash flow.
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Action to take: Investors may like shares under $27.50, where the company yields 7.5 percent. AT&T barely increases its dividend over time, but has committed to its dividend growth here. Look to take profits somewhere in the mid-to-high $30 range, where the combination of dividends and capital gains will produce solid returns.
Traders looking for a short-term rebound should target the January $29 calls. Trading for around $0.63, the option should be good for high-double-digit returns in the next few weeks as shares rebound from oversold levels. Earnings season may lead to a bounce that hits triple digits, if the market likes what the company has to say.