Dow component Verizon Communications Inc. (VZ) has been running in place since October 2018 but now looks set to test 1999's all-time high in the mid-$60s. Nearly six years of sideways action in the $50s raises the odds for a powerful breakout, opening the door to impressive returns for long-term shareholders. More importantly, low volatility should make it easy for sidelined investors to jump on board at favorable prices.
Relative strength since the start of 2018 reflects the communication giant's narrow domestic focus at a time when American blue chips are losing revenues and customers due to trade wars and growing geopolitical tensions. This safe haven status should boost future revenues despite worries about slowing smartphone sales, while the repeal of net neutrality allows Verizon to build internet pricing power, unencumbered by governmental prohibitions.
VZ Long-Term Chart (1989 – 2019)
The stock broke out above three-year resistance in the upper teens in 1989, entering a long-term uptrend that stalled in the mid-$30s in 1996. A pullback to the 50-month exponential moving average (EMA) got bought for the fifth time in six years, generating a parabolic rally impulse that continued into October 1999's all-time high at $64.00. Sellers then took control, grinding out a steep downtrend that accelerated into a seven-year low in the mid-$20s in 2002.
A bounce into 2003 got sold in the low $40s, marking resistance that stalled progress until a 2007 breakout failed to attract buying interest, reversing less than two points above new support. The stock held a trading floor near $30 into September 2008 and broke down, dumping to a 16-year low during the October crash. That deep print finally ended the nine-year downtrend, yielding a recovery wave that completed a round trip into the 2007 high in 2012.
A 2013 breakout stalled at $54.31, kicking off a range-bound period that has persisted for nearly six years. The stock has gained ground slowly within this pattern, tracking a rising highs trendline that is now targeting the 1999 high. An October 2018 breakout above the 2016 high at $57 also mounted the .786 Fibonacci sell-off retracement, clearing a major harmonic barrier, but the monthly stochastics oscillator has been stuck in a bearish cycle since December.
VZ Short-Term Chart (2016 – 2019)
The October 2018 rally cleared two-year resistance, lifting the stock to an 18-year high, but the uptick stalled well below 1999's all-time high. Selling pressure tested new support in December and January, while a bounce into February stalled at the 50-day EMA about two weeks ago. A buying spike above $57.61 should attract short-term interest in this price structure, bringing the red trendline and 2018 high into play.
The on-balance volume (OBV) accumulation-distribution indicator topped out in 2013 and entered an aggressive distribution phase that continued into the seven-year low in July 2017. Buying pressure since that time has covered three-quarters of the distance back to the prior high, marking a modest deficit that should close during a test at long-term resistance. It's wise to keep close watch on OBV in the coming weeks because an upswing could presage a rapid price advance.
The monthly stochastics oscillator is pointed lower and not cooperating with this bullish scenario, advising patience as long as price holds the 200-day EMA, now rising from $54.50. It may take a rally above the red line to generate a bullish crossover, aligning major technicals in favor of an advance into multi-decade resistance. A positive feedback loop could develop quickly once that happens, with buying waves triggering a historic breakout.
The Bottom Line
Verizon stock is inching closer to a historic test at 1999's all-time high in the mid-$60s. Bullish basing action in recent years favors a breakout, opening the door to the $70s and $80s.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.