Check Out Recent Volatility of VeriFone Before You Buy This Stock

When the market bottomed in March 2009, VeriFone was trading at less than $5. Since setting an all-time high in April 2001, its shares have been extremely volatile.
By Richard Suttmeier ,

NEW YORK (TheStreet) -- Point-of-sale electronic-payment device maker VeriFoneSystems (PAY) is scheduled to report quarterly results after Tuesday's closing bell. VeriFone has been a household momentum stock since its March 2009 low of $3.65 until its all-time high of $58.88 in April 2011.

The daily technical chart for VeriFone indicates that a positive reaction to earnings should pull the stock above its 200-day simple moving average. Yet the weekly technical chart shows the opposite scenario. Thus, investors should proceed cautiously before this stock.

Since then, it's been crucial for investors to track and capture the volatility between price highs and lows in VeriFone shares. Daily and weekly price charts can help investors do just that.

Analysts expect the company to report earnings of 32 cents a share for its quarter ended in January. During the quarter VeriFone partnered with First Data on solutions for preventing the potential theft of customer personal data exposed during checkout swipes at store registers.

Here's a look at VeriFone's performance measures and key trading levels based on an analysis of daily and weekly charts.

VeriFone Systems gained 39% last year but was down almost 8.3% so far this year as of Monday's closing price of $34.13 and is 12% below its Dec. 23 52-week high of $38.62. As of Monday's close, the stock was up 12% since trading as low as $30.39 on Feb. 2. At midday Tuesday, shares were changing hands at $33.22, down 91 cents, or 2.7%.

Investors looking to buy VeriFone after earnings should place a good-'til-canceled limit order to purchase the stock if it drops to $33.18, which is a key level on its technical charts for the remainder of March. Lower key technical levels at which to buy are $29.55 and $27.53.

Investors seeking to reduce their holdings of VeriFone should employ a sell stop below the stock's 200-week simple moving average of $33.03.

Below view the the daily chart for VeriFone over the past two years:

Courtesy of MetaStock Xenith

VeriFone's shares, priced at $34.13 at Monday's close, had a momentum run-up of 149% from a low of $15.34 on June 14, 2013, to a high of $38.26 on June 17, 2014. The stock broke out above its 200-day simple moving average (shown by the green line) to $22.50 on Oct. 17, 2013.

From the June 2013 high the stock slumped 26% to as low as $28.19 on Oct. 15. The stock has traded back and forth around its 200-day simple moving average since Oct. 2, and it is positioned below its 50-day simple moving average (blue line) at $34.83 and 200-day simple moving average at $35.08.

A positive reaction to earnings should pull the stock above these moving averages.

Still other insights can be gleaned from the weekly chart for VeriFone since 2009, below.

Courtesy of MetaStock Xenith

VeriFone has experienced lower highs since it set its all-time peak of $58.88 in April 2011. The stock has been trading back and forth around its 200-week simple moving average (indicated by the green line) since September 2012.

The weekly chart for VeriFone is technically negative with the stock fluctuating between its 200-week simple moving average of $33.03 and its key weekly moving average (shown by the top red line) of $34.65. The momentum reading, also in red along the bottom of the graph, shows a decline to $51.61, below the overbought threshold of $80.00.

A negative reaction to earnings should push the stock below its 200-week simple moving average.

Investors should observe the opposing volatility scenarios before purchasing VeriFone shares.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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