Verizon Stock Fades on Earnings Beat - Here's the Trade Now

Verizon stock popped after the telecom giant beat top- and bottom-line expectations. But the shares now are fading. Here's the trade.
Publish date:

Verizon  (VZ) - Get Report stock is higher on Friday, but the move is not robust. The shares are up less than 1%, after boasting gains of 3% at one point.

For telecom stocks, investors perk up on a 3% move.

The company reported a top- and bottom-line beat, even though revenue slipped 5.3% year-over-year. 

The sales decline was better than what AT&T  (T) - Get Report saw this quarter, with revenue falling almost twice that amount when it reported on Thursday.

Still, both stocks continue to hold up after the reports. It makes some wonder whether the bottom is in and it’s time to buy these dividend stalwarts.

It’s worth pointing out that Verizon stock pays out a 4.4% dividend yield, a noteworthy chunk given the 0.58% yield the 10-year Treasury bond is currently offering.

Let’s look at the charts to see what the bulls must do to gain control of Verizon stock. 

Trading Verizon Stock

Daily chart of Verizon stock.

Daily chart of Verizon stock.

Like the rest of the market, Verizon stock saw a powerful bounce off the March low. But the shares ran right into downtrend resistance. 

They quickly fell into a wide downward channel (blue lines), as the stock made a series of lower highs and lower lows. Coming into the report, Verizon rallied up to the 200-day moving average, then retreated.

The stock was setting up for a potential breakout as it pulled back toward possible support. That came into play near $55, where the 20-day and 50-day moving averages are.

Initially, investors got the breakout they were looking for. Verizon rallied through channel resistance and the 200-day moving average, before running into the 78.6% retracement near $57.50. Unfortunately for the bulls, this level acted as resistance and now Verizon is back below those prior breakout marks.

What now? Those who buy now must see this stock hold up over the 20-day and 50-day moving averages. Below puts the July low in play at $53.75, followed by the June low at $52.26.

On the upside, look for a close above the 200-day moving average, then channel resistance. Above those marks will shift momentum into bulls' favor. 

What we really want to see is a rotation over the post-earnings high and the 78.6% retracement. 

Above puts $59.50 resistance in play, followed by the 52-week high from December. On a dividend-adjusted chart, such as the one above, that's at $60.25. On an unadjusted chart, it's at $62.22.