Dow component Verizon Communications Inc. (VZ) completed its controversial acquisition of key Yahoo! Inc. (YHOO) assets on June 13, but sidelined market players hardly took notice, dropping the stock into a weekly loss. This bearish turn continues a long string of misfires that have now dumped the telecom giant into the 30th slot in Dow component relative strength.

Wireless subscriber growth has stalled in recent years due to worldwide saturation, with heavy competition from AT&T Inc. (T), T-Mobile US, Inc. (TMUS) and Sprint Corporation (S) eating into profit margins. Rival AT&T's DirecTV and pending Time Warner Inc. (TMX) acquisitions have been tough to duplicate, highlighting doubts about the Yahoo purchase. Taken together, Verizon stock may have peaked for this bull market cycle, opening the door to profitable short selling.

VZ Long-Term Chart (1993 – 2017)

The stock underperformed in the first two-thirds of the 1990s, gaining ground in a shallow uptrend that stalled in the low $30s in 1993. It tested that level three years later and pulled back, ahead of a 1997 breakout that posted healthy gains into the October 1999 all-time high at $64.75. It built a volatile topping pattern at that level and broke down into the new millennium, joining the market universe in the bursting of the dotcom bubble.

Selling pressure ended in the third quarter of 2002 at a seven-year low in the mid-$20s, ahead of a recovery wave that posted a lower 2003 high at $41.29. That level resisted three breakout attempts into 2005, highlighting significant relative weakness during the mid-decade bull market. The stock tested that barrier for the fourth time in October 2007 and reversed once again, in perfect timing with the multi-year market top. (For more, see: Verizon to Lay Off 1,000 Across AOL, Yahoo: Report.)

Verizon stock broke the 2002 low during the 2008 economic collapse, descending to a 16-year low at $21.48. That deep print finally ended the nine-year string of lower highs and lower lows, ahead of a powerful bounce that reached a 12-year high at $54.31 in 2013. That level has marked resistance in the past four years, triggering a July 2016 reversal that is still in control of price action nearly one year later.

The monthly stochastics oscillator fell into a sell cycle in the summer of 2016 and bounced just above the oversold level in the fourth quarter, yielding a lower high in the first quarter of 2017. This marked a significant failure, ahead of fresh downside move that reached a 14-month low in May. The indicator finally hit an oversold technical reading earlier this month, but the first quarter failure used up considerable buying power that is likely to undermine the next recovery attempt. (For more, see: Stochastics: An Accurate Buy and Sell Indicator.)

VZ Short-Term Chart (2015 – 2017)

The 2013 top near $54 gave way to a two-year decline that finally ended at $38.06 after the August 2015 mini flash crash. Multiple swing highs in the lower $50s into that climactic low reinforced long-term resistance that was tested repeatedly in 2016. Slightly higher highs between $54 and $57 failed to attract momentum buying interest, generating a series of failure swings that trapped breakout buyers.

On-balance volume (OBV) topped out in 2013 and entered a steep distribution wave that failed to respond to 2015 and 2016 breakout attempts. The indicator fell off a cliff at the start of 2017, pointing to wholesale institutional abandonment, breaking 2016 range support while dropping to the lowest low since 2012. This signals a major bearish divergence when taken together with range-bound price action, raising the odds for a secular downtrend that could last for many years. (See also: On-Balance Volume: The Way to Smart Money.)

The Bottom Line

Verizon topped out in 2013 and has built a multi-year trading range that could signal the end of gains for this bull market cycle. Even through deep support in the upper $30s may delay long-term sell signals, war-weary shareholders may now wish to reduce or eliminate exposure to this market laggard. (For more, check out: How to Pick the Best Telecom Stocks.)

<Disclosure: The author held no positions in the aforementioned stocks at the time of publication.>