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AT&T Stock Rises After the Merger. What Do the Charts Say?

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Shares of AT&T  (T) – Get AT&T Inc. Report are getting crushed on Monday, currently down almost 20% on the day. The stock has been rallying since the open, but at the lows, it was down about 22%.

Given the way AT&T stock was trading over the last two weeks, investors were surely surprised as they woke up to Monday’s price action. Or were they?

Today’s action is not the real action, necessarily.

AT&T completed its merger with Discovery on Friday — now under the ticker symbol ” (WBD) “— creating Monday’s split of the assets and businesses.

It leaves the AT&T business under AT&T (and the “T” ticker), while merging its WarnerMedia business (including HBO) with Discovery — hence the “WBD” ticker.

In any regard, one could make an argument that AT&T is now undervalued vs. Verizon  (VZ) – Get Verizon Communications Inc. Report and that Discovery is undervalued vs. other streaming giants, like Netflix  (NFLX) – Get Netflix, Inc. Report and Disney  (DIS) – Get Walt Disney Company Report.

At least, that’s the bulls’ hope. 

Daily chart of AT&T stock.Chart courtesy of TrendSpider.com

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I would put up a chart of Discovery, but with just one day of price action, there isn’t much for technical traders to go on. That leaves us with AT&T, which by the way, yields just over 5% with its dividend.

Two analysts have come out with new price targets already, with Deutsche Bank assigning a $24 target and JPMorgan assigning a $22 target.

Bulls are now looking to see if AT&T stock can reclaim the key $20 level. As for whythis is a key level, you can see how it has been a notable support level for roughly two decades by looking at the monthly chart below.

Monthly chart of AT&T stock.Chart courtesy of TrendSpider.com

If it can clear $20, then the JPMorgan analysts may have a reasonable price target of $22. That gets AT&T stock back to the prior low when it bottomed at $22.02 in December.

From there, the stock can begin to fill the gap back up to $23.54 — almost back to Deutsche Bank’s target.

If we see the latter action play out and AT&T begin to fill the gap, keep an eye on the short-term moving averages, like the 10-day and 21-day. These could act as resistance amid the rally.

As for the downside, today’s low of $18.85 is a good reference point to keep in mind. Below that opens the door down to the 161.8% downside extension at $18.65, which AT&T stock nearly hit today (and some traders wish it did). 

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