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Verizon Communications Inc. (VZ), the telecommunications giant, is on the cusp of a double-digit run. The stock is considered a utility company now, as reflected by its steady share price along with the very stable revenues and earnings from its data business.
The lows this year for Verizon stock matched the highs it set in 2013. For roughly the past eight years, this stock has basically stayed either 10% above or 10% below $54 per share.
Lately, the stock has been trading to the upside. It was only a recent slump since December 2020 when the stock fell back to $54 per share, a 12% decline. With the stock hitting a major support area and the price shaded red on the chart, things appear set to turn around.
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The green support line on the bottom goes back to 2018. It was briefly breached when the pandemic hit, but the stock quickly recovered, and you can see that the level has been holding as key support since then. And the red resistance line across the top has been hit multiple times as well, going back to 2018. It is our short-term price target for the push higher in shares of Verizon.
Right now, the price of the stock is shaded red, meaning the lagging quadrant of the relative rotation graph (RRG). The RRG combines the relative strength of a stock to the S&P 500 with momentum to create a unique view on the stock. It shows that stocks tend to rotate from leading the overall market, weakening as the momentum slows, eventually lagging the market, and then improving as momentum picks back up to come back to leading the market once again.
With Verizon’s price shaded red and lagging the market, we can expect it to improve and eventually lead as shares bounce back from these lows. However, the upside potential is a breakout rally past the red resistance line to an all-time high of $70 per share.
Since the consolidation period has lasted for two and a half years, the stock will eventually break out. It always does. The last run on a breakout was $10 per share, from $52 to $62. This time, we would look for a jump to more than $70 per share, a 25% rally.
The Bottom Line
Verizon has been a stable and steady stock for years, but it is prone to breakouts. One is likely in the works as the stock bounces off a key support level. The RRG signals that Verizon stock could make a run higher from here. Once it breaks out past the red resistance level, shares are likely headed to an all-time high, 25% above its current price.
