Verizon Communications (VZ) - Get Report is trading just 3.8% below its 20-Year high of $61.58 set on Nov. 20, 2018. My call is to buy the stock between its semiannual value level at $58.68 and its monthly pivot at $69.24. My price target for a trade into year end is its annual risky level at $62.95. The stock is fundamentally cheap with a P/E ratio of 12.63 and a dividend yield of 4.00%, according to Macrotrends.
Verizon is a component of the Dow Jones Industrial Average and has been a perennial member of the "Dogs of the Dow" and the dividend yield above 3% will qualify the stock for the dog pound in 2020.
The stock closed Wednesday at $59.22 up 5.3% year to date and is up 13.3% from its 2019 low of $52.28 set on Jan. 30. Verizon has beaten earnings-per-share estimates in six consecutive quarters.
Verizon has a stable of innovative products and services. Their new smart dash-cam helps truck drivers stay safe on the highways. Verizon Wireless is the largest cellphone carrier in the country. The company is well-positioned to have significant growth in the world of 5G today and over the next few years. Content its king and Verizon has Oath, which means solid Internet content from AOL and Yahoo. A positive that goes unnoticed is that Verizon owns the content and email platforms Yahoo and AOL. This is now marketed as Verizon Media. The AOL feed is loaded with key headlines and stories. Yahoo focuses on news from the financial markets including streaming video services.
The Daily Chart for Verizon
Courtesy of Refinitiv XENITH
The daily chart for Verizon shows the volatility seen over the last 52-weeks. The stock is consolidating a 15% correction from its 20-year high of $61.58 set on Nov. 20, 2018 and its Jan. 30 low of $52.28. The stock ended 2018 at $56.22, which was an input to my proprietary analytics and the annual risky level is above the chart at $62.95. The mid-year close of $57.13 was input into my analytics and its semiannual pivot at $58.68 has been a magnet since Sept. 6. The third-quarter close of $60.36 was an input to my analytics and the fourth-quarter risky level is $61.10, with its October pivot at $60.24.
The Weekly Chart for Verizon
Courtesy of Refinitiv XENITH
The weekly chart for Verizon is positive but overbought with the stock above its five-week modified moving average at $59.14. The stock has been above its 200-week simple moving average or "reversion to the mean" since the week of June 29, 2018, with this average now at $51.99. The 12x3x3 weekly slow stochastic reading is projected to rise 84.35 this week up from 83.88 on Oct. 4.
Trading Strategy: Buy Verizon between semiannual and monthly pivots at $58.68 and $60.24, respectively, and reduce holdings on strength to its annual risky level at $62.95, which would be a fresh 20-year high. There is a quarterly risky level at $61.10 for short-term traders looking to book profits.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter so the close on Sept. 30 established the level for the fourth quarter. The close on Sept. 30 also established the monthly level for October as monthly levels change at the end of each month.
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 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 its 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.