Verizon (VZ) shares made a powerful move in Tuesday’s session. It was only a fraction over one percent but it broke through two months of base resistance and made a new all-time high.
A number of the bond-proxy stocks and those in the utility sector saw positive moves today. Verizon does have a 4.3% dividend yield. But there are technical factors that support the move.
The breakout was from a familiar “W” basing pattern which, in this case, is a continuation pattern. A strong looking hammer candle took out horizontal resistance situated in the $54.50 area. The breakout suggests resumption of the rally in Verizon shares that began in June.
The September bounce off support at the 50 day moving average is significant. The relative strength index is back above its 21 day moving average and center line. This reflects this month’s upside price momentum. Overall volume has started to track above the 50 day moving average of volume, and Chaikin money flow is turning positive. These readings suggest early but renewed buying interest.
There are several ways to measure Verizon’s potential upside from the continuation pattern breakout. One is to take the length of the prior June to August rally, and add it to the breakout level of the consolidation phase. The run from the June $46.50 low to the August $54.50 high is $8.00 and this methodology adds that length to the $54.50 breakout level. It projects up to the to the $62.50 area.
A shorter term price projection uses the height of the channel added to the break out level to project a more conservative price objective. This $2.00 move targets the $56.50 level.
In either case, the current technical condition of the Verizon chart offers a good risk/reward long entry point. The upside projections are simply technical potentialities and traders are always required to monitor and carefully manage the trade as it progresses. Capital preservation is job one.