Verizon Communications Inc. has all the good news baked into its price

Oct 13th, 2010 – Comment

without some new juice investors who got in earlier are booking profits.


About the Author

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


Read the author's full profile.


Further Research

Read more about Telecommunications.


Lou,

Just read your piece on AT&T and really enjoyed it. I have been considering both it and Verizon so what’s your position on its arch rival?

Best regards,

Kim

Hi Kim,

Thanks for the assignment. You have exhibited the traits of a conservative and disciplined investor by asking about the competition. Asking questions is central to successful investing and when you want to know more about the competition and the sector you are in the process of making a case about whether or not to risk your capital. Excellent work. Lets examine the charts for Verizon Communications Inc. ( VZ NYSE) and get a sense of trend, support, and resistance.

The three year chart for VZ illustrates the reversal of the the downtrend that started in July of 2010 as the stock caught a bounce off of support at $24.50. At this point the RSI is signalling that VZ is overbought and the extreme uptrend depicted looks to be losing some momentum.

There is resistance that comes into play as VZ approaches the  $34.00 range.

My interpretation of the chart is that investors got a bit over stimulated on the prospect of VZ making inroads on AT&T’s ( T NYSE) exclusive distribution deal for the Apple iPhone. The  speculation is that exclusive contract is expected to come to an end in mid 2011 and perhaps all the good news is already baked into the current price.

The six month chart tells the tale of a pull back from an aggressive advance. The RSI and MACD are both signalling a change of momentum from buying towards selling. There is a small ledge of support at $32.00 which needs to be monitored to ensure that it holds. If not it will test support in the $30.00 range.

At this point VZ has had its run and on an operating basis it needs to continue to build out its network to support the introduction of the iPhone to avoid the problems that AT&T had when they introduced the data hogs. VZ already provides service to over nine million Android subscribers and that field experience has them well to positioned to allocate the resources needed to provide a smooth introduction of the Apple iPhone. But that introduction is not on the near horizon and without some new juice investors who got in earlier are booking profits.

Happy Capitalism!

Categories: Telecommunications
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media