Verizon Is Ready for a Monster Rally -- Can You Hear $60?

 | Jul 15, 2017 | 10:00 AM EDT
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For most investors, the recent drop from Verizon Communications' (VZ) all-time high, near $54, to these low $40s hasn't been fun. Yet, the market's message was so clear up there, according to our DSE (decision support engine), which monitors dozens of objective indicators.

If you weren't able to hear the overbought warnings the market was broadcasting, don't worry. The equal and opposite message is now being broadcast to those that know what to listen for.

Can you hear it now? Let's listen in a language that the market likes to speak to us in: "marketese."

Price has fallen from $54 to this week's low near $42. Members of our live-market Trading Room and DSE Alerts services (Click here to join these services in a free 10-day trial) have been tracking this decline for a year, looking for a set of conditions that cause buy signals to be issued.

Many of those conditions are now in place, rendering an objective, empirically based, buy signal in this low-$40s zone. First, the stochastics that reached above the extreme overbought 90% threshold (sell actions indicated) have receded to the extreme oversold 10% threshold (buy actions indicated). This is also the case at the intermediate-term degree (weekly bars) of trend, as well as the short-term degree (daily bars) of trend.

Next, while price was at the upper two-standard deviation band (olive/gold line), which controls 95% of normality below the band, around $54, they have moved to the lower two-standard deviation band, which controls 95% of normality above the band, around $42.

In addition, the rise since 1996 now has all of the required structural components, based upon 200 years of pattern-recognition correlations, to conclude that the recent decline is over, or nearly so, and that a thrust higher is the highest probability ranked outcome.

If we use some basic guidelines of Fibonacci projections, this coming rise should mimic the rise in the blue box to the 1999 peak -- about 18 points. From this week's low near $42, that portends a test of $60 -- a 43% rally from this level.

Therefore, DSE warns vigorously that this is not the time for selling actions. Rather, if short, use buying actions to cover and take profits, or at least put protective buy stops in place at the $44.50 level. If flat, use this level or any further dip into $41 +/-$2 to begin establishing long exposure. If still long and wrong from the $50s, now is the time to add strongly per these parameters.

Buying actions are now indicated.

For updates on this analysis, as well as other trading opportunities, try Ken Goldberg's DSE Alerts service for free for a couple of weeks, or contact him at support@dsetrading.

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