Verizon Communications Inc. (VZ) rose less than 1% in pre-market trading on Thursday after the firm posted earnings per share (EPS) of $1.23 and second-quarter sales of $32.07 billion. EPS exceeded expectations, while sales fell 0.4% year over year. The telecom giant attributed the results to lower-than-expected cellular equipment sales and cash flow, while reiterating its low-single-digit percentage growth outlook for fiscal year 2019.
So far this year, the stock has carved a symmetrical triangular pattern after breaking over January 2018 resistance in the low $50s in an October breakout. Accumulation has dipped throughout the time but remains near to four-year highs. It’s hardly surprising that investors are clinging to the megacap, with the substantial 4.26% ahead dividend yield offsetting sideways price movement.
Furthermore, there are two competing perspectives on the government’s recent approval of the merger of competitors T-Mobile US, Inc. (TMUS) and Sprint Corporation (S).To finalize the transaction, T-Mobile must sell assets to Dish Network Corporation (DISH), perhaps enhancing competition and cutting consumer costs, but the category will now be controlled by just three firms, potentially enabling them to hike prices with greater ease. For the time being, the market sees the merger as a win-win situation for the whole industry.
VZ Long-Term Chart (1996 – 2019)
The stock gained significantly in the 1980s and 1990s, rising in a gradual uptrend that included two splits until peaking in 1999 at an all-time high in the mid-$60s. After a 30% drop into the new millennium, it challenged that high and moved rapidly downward, initiating a severe downtrend that logged two selling waves into July 2002’s seven-year low of $24.23. That was the lowest low for the next five years, until a fast rebound that halted in the low $40s six months later.
After that, price action settled into a trading range, with resistance near the recovery high and support in the mid $20s. It crashed in 2005 but immediately recovered, moving upward in a steady increase that met range resistance in 2007. A breakthrough failed after just two points were added, paving the way for a ferocious drop that smashed the 2002 low during the 2008 economic meltdown. The stock stabilized at a 16-year low three points below that level then recovered, immediately stopping in the low $30s.
A breakthrough in 2010 gained traction in 2013, rising over the 2007 high before stalling in the low $50s. That price level served as resistance during the 2018 breakout, which has gained little or no upward momentum, instead settling into a symmetrical triangular pattern. Nonetheless, the stock is trading within a hair’s breadth of its 1999 high, with a break into the upper $60s triggering big buying signals.
A Fibonacci grid spanning the nine-year downturn emphasizes the significance of maintaining the 2018 breakthrough at $54. After a five-year testing period, the purchasing impulse surpassed the.786 sell-off retracement level, possibly opening the way to the 1999 high and a significant breakthrough. The 10-month triangular pattern is directly on top of fresh support, enabling market participants to monitor developments from a close-up vantage point.
Bears have the upper hand as we enter the summer months since the monthly stochastics oscillator has been in a complicated sell cycle since July 2017 and has yet to hit the oversold level. Meanwhile, the stock is trading less than two points over triangle and breakout support, indicating that selling pressure isn’t needed to cause a breakdown. Hopefully, this morning’s buy-the-news response signals that investors are prepared to stick it out in the coming months.
The Bottom Line
Verizon Communication stock has risen somewhat after a disappointing quarter, but it remains perilously near to 2018 breakout support.
At the time of publishing, the author had Verizon stock in a family account.
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