Verizon Communications Inc. (VZ) has risen to the top of the Dow Jones Industrial Average performance list, lifting into a historic test of 1999's all-time high in the mid-$60s. This unusual strength is doubly impressive given broad market headwinds, reflecting the company's narrow domestic focus at a time when American multi-nationals are losing customers due to trade wars and growing geopolitical tensions.
The company's safe haven status could underpin future returns despite worries about declining smartphone sales. Verizon is well positioned to expand margins following the repeal of Obama-era net neutrality laws. State challenges will likely persist into the next decade, but that won't stop the communications giant from finding new ways to profit from its growing power to control pricing on the internet backbone.
VZ Monthly Chart (1993 – 2018)
The stock cleared 1989 resistance in the mid-$20s in 1993, entering a shallow uptrend that gathered strength in 1997. It more than doubled in price into 1999, posting an all-time high at $64.75 in October and turning sharply lower into the new millennium. A grinding series of lower highs and lower lows found support at the 1993 breakout level in 2002, printing a bear market low ahead of a 17-point bounce into 2003.
It traded within those range boundaries into a 2007 breakout that added less than two points before reversing in a failure swing that reinforced multi-year resistance. Sellers took control through the 2008 economic collapse, generating a steep decline that undercut the 2002 low by less than three points. That marked a historic buying opportunity, yielding a recovery wave that mounted the 2007 high in 2012.
Price action has booked surprisingly little upside since that time, with shallow upticks stalling in the low to mid-$50s between 2013 and 2016. However, the multi-year pattern has also carved a rounded base on top of the prior decade's trading range, generating a bullish stair-step appearance, while recent momentum has lifted the stock within four points of the 1999 high. In addition, accumulation has taken off like a rocket in 2018, lifting the on-balance volume (OBV) indicator to a four-year high.
VZ Weekly Chart (2013 – 2018)
The uptrend finally cleared resistance at the .786 Fibonacci retracement of the nine-year downtrend at the end of October 2018, raising the odds for a rapid advance into the 100% retracement in the mid-$60s. Price action just mounted the top of the shallow channel in place since 2013, but the advance could stall at any time and generate a pullback into harmonic support in the mid-$50s, signaling a low-risk buying opportunity for long-term positions.
Unusual resilience in coming weeks, characterized by strong demand near $60, would bode well for a successful breakout above the multi-decade high. Conversely, a reversal into the channel and slow-motion advance into resistance could delay a breakout by several years, given this stock's odd momentum characteristics since 2013. The broad market environment could dictate which scenario unfolds in the coming months, with defensive positioning favoring an earlier breakout.
Weekly and monthly stochastics oscillators are engaged in buy cycles that are near or have crossed into overbought levels. This marks a harmonic convergence that should offer bulls a major tailwind into 2019, while raising the odds for rapid price gains. Even so, it's hard to recommend buying this stock so close to resistance, especially after the impressive gains posted in the past month.
The Bottom Line
Verizon stock is finally completing the last leg of a 100% retracement into the 1999 high and could break out in 2019, entering an uptrend that has the potential to last many years.
<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>