CenturyLink Inc. (NYSE: CTL) saw its shares crushed last week. The telecom player slashed its dividend and it will no longer have an implied yield of 8%, 9%, nor over 10%. After the news was released, shares fell from about $41.50 down to almost $32.00 before the dust settled. The move was followed by wave after wave of analyst downgrades even though many investors were already expecting that this company had no choice but to slash its dividend handily.

When we covered this last week, we even joked that he last analyst to downgrade the stock should leave the room. Here were the downgrades at the time:

• Ameriprise Financial downgraded CenturyLink to Sell from Buy.
• Citigroup cut it to Neutral from Buy.
• J.P. Morgan cut it to Neutral from Overweight.
• Macquarie cut it to Underperform from Neutral.
• Nomura cut it to Reduce from Buy.
• Raymond James cut it to Market Perform from Strong Buy.

So, what exactly does this imply? When you see a huge drop and a slew of downgrades and on super-high volume (70 million shares), this generally signifies a trading bottom. Longer-term is different because stocks that get hit real hard tend to see future sell-offs as well. The problem is that CenturyLink shares managed to squeeze out a 2% gain on Friday and that was going into a long weekend. Now shares are up yet another 6% at $35.00 on another 16 million shares or so.

Based upon our old trading rule of companies recapturing up to one-third of their oversold losses, CenturyLink shares would start running into serious profit taking from bottom-fishers around $35.25 to $35.50 and shares hit a high of $35.17.

We would note that we received communications that the managers over at the Ranger Equity Bear ETF (NYSEMKT: HDGE) were expecting the drop as this has been a large position in the short-only portfolio. The communication we received from them was noting that a capital lease overstated free cash flow to the point that the dividend could not be covered. as well as a note discussing accounting adjustments tied to the Qwest buyout as well as underfunded post-retirement obligations.

That last bit of data does not exactly sound too promising ahead. We still would point out that the bounce seen so far has come back to being very close to what would be our normalized short-term level.

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