VeriFone Systems, Inc. (PAY) provides in-store point-of-sale devices used by consumers while swiping credit or debit cards or using the chip-reading feature to pay for goods. The company offers hand-held devices as well as services conducted using smartphones.
The stock closed Friday at $18.05, up just 1.8% year to date and up a solid 19.5% since setting its post-election low of $15.10 on Dec. 2, 2016. The stock set its post-election high of $21.48 on Sept. 11, and it is in correction territory since then with a decline of 16%.
VeriFone stock has had a volatile ride since trading as high as $39.27 in June 2015, declining 62% to its multi-year low of $14.96 set on Oct. 17, 2016. This is evaluated using Fibonacci retracements of the decline on the daily chart shown below.
Analysts expect VeriFone to post earnings per share of 43 cents to 44 cents when it reports results after the closing bell on Dec. 12. Wall Street expects VeriFone to remain a dominant player in the payments industry and looks for year-over-year earnings and revenue gains to enhance a near-term rise in the share price. The key will be guidance related to the company's restructuring plans. (See also: VeriFone Q3 Earnings in Line, Revenues Beat Estimates.)
The daily chart for VeriFone
The daily chart for Verifone shows horizontal lines that represent the Fibonacci retracement levels of the decline from the June 2015 high to the October 2016 low. The chart clearly shows that the stock has been struggling to sustain gains above the 23.6% retracement level of $20.67, which has been a magnet since Feb. 24.
The weekly chart for VeriFone
The weekly chart for Verifone will be upgraded to positive if the stock is able to close this week above its five-week modified moving average of $18.30, which is highly likely in the case of a positive reaction to earnings. The longer-term upside on this positive outcome is strength to its 200-week simple moving average at $26.57, which is the stock's "reversion to the mean." The stock failed at this milestone during the week of April 22, 2016, when the average was $29.71. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 23.64, rising from 23.01 on Dec. 8.
Given these charts and analysis, my trading strategy is to buy weakness to my weekly value level of $16.04 and to reduce holdings on strength to my semiannual risky level of $29.16. Penetrating and holding my monthly pivot (or magnet) of $18.66 is the key to a positive earnings reaction. (To learn more, check out: How to Use a Moving Average to Buy Stocks.)