How About AT&T

Apparently, no one is benefiting from the Verizon iPhone announcements. AT&T (T) didn't go down as much as Verizon today, but they start from a worse position. Over the last few days they have gone below the 50 day MA and the 200 day MA is less than $1 away. 

They are are the first fib support. The next one actually matches the 200 day MA at $27. They are also at the bottom of a regression channel starting from the lows of July to today.

And technically, they are in a world of hurt - everything is negative. On the other hand, if $27 can prove to be support, it could make a nice entry point. 

Fundamentally, they are in good shape with a forward P/E of around 11 (cheaper than Verizon). The dividend is now around 6% (higher than Verizon). That should help stop the selling as many value investor should step in soon.

For what it is worth, MSN Scouter ranks AT&T as a 9 (Strong Buy) and Zacks ranks them as 3 (Hold).

Another Tough Day for Verizon

Despite the iPhone announcement, Verizon (VZ) took close to a 2% dive today going opposite the market. This not completely unpredictable as most indicators have been bearish for the last couple of days. But where does it go? If you believe in Fibonacci, support is 10% away!

Based on the July low and the recent highs, $32 should provide good support.That would be a 50% retracement, but the stock has run up incredibly over the last month or so and there has to be some profit taking.  I would actually expect $33 to hold anyway as the 50 day MA is close by. But the stock is now close to 20% over it's 200 day MA. That's high! The chart above is actually pretty compelling... I am not a great believer of Fibs, but this has to be a beautiful example...


A regression channel provides similar analysis:

As I said over the weekend, the next week or so should be telling!

Verizon and the iPhone

Apparently Verizon is about to announce that they will now sell the iPhone for use on their network. Friday was a down day during market hours, but look what happened after hours once the news started to spread.

And we thought that the news was already baked in the price! 


The stock has has quite a run in the last couple of weeks so I wanted to see what the chart could tell us about the current situation. Here are a couple of charts - first with my custom indicators, then with the traditional RSI and MACD.

The stock took a breather in October and November, but December was incredible with a 12% run. Until the after hours action on Friday, it looked like January would bring a correction, but the latest news counteracted the day action. All the indicators are still very bullish but if we remove the after-hours activity on Friday, we can see a strong inflection in the MACD which could have pointed to the beginning a larger correction:

Fibonacci tells us that there is some good support between $32 and $34. The $32 line did serve as strong support in October and November.

What will happen once the announcement is made? What impact will the iPhone have on the company's bottom line? How many users will switch from AT&T to Verizon in search for a better network? Bloomberg has a story estimating that Verizon will sell between 9 and 12 millions iPhone this year. And that 5% of Verizon users will switch to an iPhone - these are good news for Apple. But for Verizon? How much will they subsidize the phone in the first years?


Fundamentally, VZ is trading at a high P/E, and the forward P/E is around 16 which might be a bit high given the projected growth rate for the next 5 years. But these predictions might need to be revised given the latest news.

Of course, VZ offers a new 5% dividend which will support the price. But at this level, I would hold until we get more information from the company on the impact of the iPhone on their numbers.

Recommendation - Hold

Position - None

For what it's worth, Zacks has a 3 rating (Hold) and MSN Scouter has a 9 rating (Buy).


And finally, I found an interesting correlation between Verizon and AT&T this year. These 2 stocks were walking almost in lockstep the entire year up the last week's correction. Will that continue or will see a divergence?