It has not been a good year for Verizon Communications Inc. After the election last November, shares of the telecoms provider rallied about 10% and hit a year-to-date high of $54.83 back in early January. Since that massive move, however, the stock has been on a landslide, dropping as low as $42.80 back in July.
The decline was initiated mainly by Wall Street analysts downgrading Verizon (VZ) due to price competition from cheaper rivals such as T-Mobile US Inc. (TMUS) and Sprint Corp. (S). Since hitting its July low, shares had been inching gradually higher, but then on July 27, Verizon reported better-than-expected earnings, and the stock took off, working its way back above its 200-day moving average of $48.36. Now that is what I call a decent size move.
Fundamentals have improved somewhat this quarter, and ever since Verizon's earnings win, shares have been in a nice consolidation pattern, trying to digest this 7% move, which is actually quite healthy. What also adds to the attraction of Verizon stock is its 4.8% dividend yield.
Chart source: TradingView
I personally like to use the 200-day moving average, as indicate by the blue line on the chart above, to determine whether or not I go long or short on a stock. It keeps my technical analysis simple and is helpful in providing support and resistance for stocks. When prices are above the moving average, it can act like support, and when prices are below, it acts as resistance. The 200-day moving average can clearly help you decipher if you should stay with the stock or punt it. And while it weeds out a lot of noise, as with any other gauge, it isn’t foolproof.
The Bottom Line
I would like to see Verizon stock continue to consolidate in a sideways pattern for a bit longer and continue to hold onto its 200-day moving average of $48.36. If this does happen, then shares have the potential to break out to $50.90 and potentially higher. Place your stops accordingly.
For more institutional advice for the individual investor, please visit Allied Millennial Partners.
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