PreMarket Prep Stock Of The Day: AT&T

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

One characteristic of the market recently has been the strong getting stronger and the weak get weaker. A prime example of this is the price action in AT&T Inc. T, which is Tuesday's PreMarket Prep Stock of the Day.

AT&T's Horrible Relative Performance: Since AT&T peaked in July 2016 at $43.89, it has underperformed the S&P 500 index by a wide margin. At its price of $22.60, this makes for a decline of 49%. Over that same period, the index has returned 110% at the price of 4,574.

Of course, the healthy dividend that AT&T formerly paid cushioned the blow, but the issue has still had an underwhelming return.

Most Of The Damage Done Since May 17: When AT&T announced it was slashing its dividend and reorganizing the company once again, investors rushed to the exit. The primary reason for owning the issue was because of its yield. With that now eliminated, there was no good reason to have the stock in your portfolio.

This was reflected in the price action when the issue mysteriously rallied from its prior day close ($32.24) to $33.88 and collapsed to end the session at $31.37.

Cramer Hate: The day after the company delivered the bearish news, the widely followed Jim Cramer of CNBC repeatedly lambasted the company for its past and present actions. That, coupled with investors along with dividend funds cutting the cord, resulted in a three-day decline of 10% from which it never recovered.

AT&T Monthly Chart Says It All: Investors sometimes get caught up in some of the shorter-term price action in an issue and let that determine their investment strategy. By going out longer-term and relying more on the monthly charts, a true perspective on the issue can be derived.

Since April, the issue has made a lower higher every month, a lower low in six of seven months (August low of $26.88 vs. September low of $26.94) and a lower close every month. November has been brutal, as AT&T peaked at almost $2 from its October high, made a lower low by $2.46, and at $22.62 is lower for the month by $2.64.

AT&T Moving Forward: In order for an issue to start going up, it first has to stop going down, consolidate and find a catalyst to spark a rally. For now, it is still going down and building up more and more overhead supply the lower it goes. Based on the monthly charts, the next monthly low comes in at its March 2009 low of $21.62.