Verizon Communications Inc. (VZ) is set to report earnings before the opening bell on Tuesday, April 23. This stock is a component of the Dow Jones Industrial Average and has been a perennial member of the "Dogs of the Dow." This stock is cheap with a P/E ratio of 12.32 and a dividend yield of 4.15%, according to Macrotrends.
Version stock closed last week at $58.04, up 3.2% year to date and in bull market territory at 25.9% above its 52-week low of $46.09 set on May 9, 2018. The stock set its 52-week high of $61.58 on Nov. 20. Verizon owns the content and email platforms Yahoo and AOL, which form a worthy internet platform known as Oath.
Analysts expect the telecom giant to report earnings per share of $1.17 to $1.20 when it releases results on Tuesday morning. The earnings focus will be on Verizon Wireless and the status of its 5G network.
The daily chart for Verizon
Verizon stock has been above a "golden cross" since July 26, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices would follow. This bullish formation was in play as the stock tested its 200-day simple moving average at $53.29 on Jan. 29, providing a buying opportunity.
The close of $56.22 on Dec. 31 was an important input to my proprietary analytics – the resulting semiannual pivot remains at $55.97, and its annual risky level is $62.95. The close of $59.13 on March 29 was another important input to my analytics and resulted in a quarterly value level at $56.32 and a monthly risky level at $62.05. The 50-day and 200-day simple moving averages are $57.50 and 55.71, respectively.
The weekly chart for Verizon
The weekly chart for Verizon will be negative if the stock ends this week below its five-week modified moving average at $58.12. The stock is above its 200-week simple moving average, or "reversion to the mean," at $50.55. Note the potential double top formed by Verizon shares during the weeks of Nov. 23, 2018, and March 29, 2019.
The horizontal line at the top of the chart corresponds to my monthly risky levels at $62.05, which is just below my annual risky level at $62.85. The "reversion to the mean" in green has been a magnet for the past 10 years. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 72.36 this week, down from 75.02 on April 18.
Trading strategy: Buy Verizon shares on weakness to the quarterly and semiannual value levels at $56.38 and $55.97, respectively, and reduce holdings on strength to the monthly and annual risky levels at $62.05 and $62.95, respectively.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February and March. The quarterly level was changed at the end of March.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.