On Tuesday's Mad Money program Jim Cramer said that money managers were flocking to the recession stocks including Verizon Communications, Inc. (VZ) . Yes, Verizon is one of the strongest gainers over the past few weeks," said Cramer. Prices turned higher from October and have strengthened further this month.
Let's look at a few charts to see how much more upside remains.
In the daily bar chart of VZ, below, we can see a February-June bottom followed by a strong rally. Prices are trading firmly above the rising 50-day moving average line as well as the bullish 200-day moving average line. Last July we can see the 50-day average cross above the 200-day average for what is commonly called a golden cross. Moving average signals are by definition late but this signal came not too far off the bottom.
The daily On-Balance-Volume (OBV) line turned higher at the beginning of June and its rise tells me that buyers of VZ have been more aggressive. This rise helps to confirm the price strength.
In the lower panel is the trend-following Moving Average Convergence Divergence (MACD) oscillator, which is above the zero line in bullish territory but we can see a short-term take profits signal. This sell signal could get reversed if prices continue higher.
In the 10-year weekly bar chart of VZ, below, we can see that prices have broken out on the upside from almost a six-year consolidation pattern. Prices are above the rising 40-week moving average line so we know the mathematical trend is up.
The weekly OBV line is moving up this year and is not far from making a multi-year breakout on the upside. The longer-term weekly MACD oscillator is bullish and pointed higher.
In this long-term Point and Figure chart of VZ, below, we can see the recent upside breakout and a price target of at least $71.
Bottom-line strategy: VZ was stuck in a multi-year sideways consolidation pattern and its recent upside breakout is very significant and not likely to be a flash in the pan. Prices could rally into the $71-$75 area in the months ahead. Risking a close below $57, investors should trade VZ from the long side.